Internet a new challenge, and a handy scapegoat

By Richard Braddell

Telecom's revision of connection arrangements for internet service providers last month falls well short of an admission that it has under-invested in its network.

But it raises questions all the same, because the 2c a minute local connections charge imposed to push users towards the new free 0867 network is aimed at preserving the integrity of the voice network.

"We simply cannot risk a situation developing where, for example, customers cannot reach the 111 service in time of need because Internet users are tying up the voice network," Telecom said in justification.

Looking at the latest service indicators given to the Ministry of Commerce, Telecom would seem to have a point.

In the year to March, it lost more than 1000 hours in electronic exchange failures, a figure four times higher than the preceding year and 27 times up on the year before that.

Even with much publicised embarrassments such as the Palmerston North failure out of the way, the second half of the year included 400 lost hours, which probably owed little to the internet.

Indeed, some people believe the strain placed by internet use on exchange switches is overstated. Although internet connections can go on for an hour or more, the switch - a kind of computer processor - is idle except when the connection is made and ended, leaving it free to do work on other voice traffic.

The issue may be more one of the number of ports, or entry points to the switch, which will still cost money to provide.

Internet use is undoubtedly creating problems for telephone companies around the world.

Since Telecom's announcement, Australia's Telstra has said it will spend $A2 billion over the next three years doing up its copper network, partly to get it in shape for the expected boom in demand for second lines for the internet.

In what amounted to a confession that investment had been inadequate, Telstra said it had miscalculated the internet demand and had overestimated the impact cellphone use and two new pay-TV networks would have on demand for basic services.

While cellphone numbers have climbed to 6 million, landline use has continued unabated, and migration to the hybrid coaxial cable networks owned by Telstra and Cable & Wireless Optus has been much slower than forecast.

Ultimately, Telstra decided, network renewal was needed to counter the mounting cost of having to do 25,000 repairs a week, most arising from leaky cables weakened by constant maintenance.

The theme is not entirely unfamiliar in New Zealand, where three years ago Telecom had to replacing waterlogged cables in Auckland which were pushing fault statistics and cost through the roof.

But it would seem Telecom and Telstra are not alone if they have been miserly in investment.

An occasionally vocal critic of Telecom, Australian telecommunications analyst Paul Budde, placed Telecom and Telstra in the same camp as other telephone companies around the world which, in the hype of privatisation, have focused over the past 10 to 15 years on profit, rather than on fixed network investments.

"You hear it of the Dutch network, you hear of it in the German network, you hear of it everywhere around the world," he said.

Telephone companies have several options in coping with the internet. The most straightforward is simply to keep the basic network up to date.

But companies are also experimenting with technologies such as xDSL, which diverts internet calls from traditional voice switches and provides performance standards which telephone companies can charge for.

Whether xDSL will be the saviour remains to be seen.

It is still relatively expensive, it must compete against a free dial-up service and it is still in the first stage of the technology cycle - that of hope, which is followed by reality and then the patches to fix it.

As one telecommunications equipment vendor observed, telephone companies are not philanthropists, and investing to improve internet access does not sit well when they are not getting a penny extra in revenue.