Well yes, minister, we have a problem

By Richard Braddell

Between the lines



It's a cheap shot but irresistible: the Yes, Minister sobriquet applies so well to ministerial briefing papers on telecommunications.

So smoothly has the Ministry of Commerce aligned with an activist government's lack of tolerance for distortions in telecommunications that it hardly seems like a policy reversal at all.

Yes, the ministry thinks it a good idea that the new Government inquire into telecommunications. And the department that seemed content to sit on its hands along with the previous Government now thinks the regime could be refined.

It pinpoints a string of problems, many of them areas where its ministerial advice previously reflected past ministers' beliefs that the market was the best place to sort things out.

Now it's questioning whether businesses are getting the deal they should. Local business calls have actually gone up in price, as have "short-haul" national calls; business rates are lagging behind the OECD; and land to mobile calls are too expensive, it finds.

The problem, it seems, is that new entrants are simply not forceful enough to counter-balance the monopoly power inherited by Telecom. The major culprit seems to be the interconnection agreements between Telecom and the new players.

Yet for nine years the previous Government wouldn't get involved in the agreements even though their apparent one-sidedness was cited by the new entrants as an egregious example of Telecom's market power.

Further investigation into interconnection is merited and (catch your breath) the unbundling of the local loop- hitherto regarded as too much of an intrusion on Telecom's property rights, even if several other countries, including the UK and Australia, are going down that road.

But the ministry's new-found gung ho has its limits. It finds that the number administration deed, despised by some in the industry, seems to be working well - even though a prerequisite inquiry into the economic merits of portability has still to start more than a year since the deed's inception.

The ministry is also phlegmatic about Telecom's use of discriminatory pricing when Saturn began service, and it has little to say about the 0867 internet controversy.

But its paper does signal that the core precept of telecommunications regulation, the light-handed regime, has its limits. "We do not consider that recent regulatory initiatives are sufficient to address that uncertainty," the ministry said of the interconnection process.

Sadly, the time when decisive intervention would have paid real dividends may be drawing to a close.

An industry specific regulator may have been valuable when local interconnection agreements were being hammered through the courts more than five years ago and little was known about how to price them.

But the market in 2000 is more savvy, with the help of disclosures now required of Telecom.