Battle of broadband

By PETER GRIFFIN

The road to the knowledge economy is straight and clear, it's the on and off ramps where the high-speed squeeze hits.

The information and communications technology (ICT) sector may be a key area the Government is targeting for "growing an innovative New Zealand", but our lukewarm relationship with high-speed internet and a lack of competition in the broadband market threatens to stunt that growth before it starts.

Despite New Zealand having among the highest spending on ICT in the world in relation to GDP (gross domestic product), the country is a blip on the global radar screen of broadband internet take-up - we languish in 20th place among OECD countries. That's a problem when you're trying to sell New Zealand as a cheap location for multinational software companies to set up development centres or breathe life into "sunrise" industries.

Telecom cringes at the mention of the OECD figures, but has put our low ranking to our geographic position away from the main information sources in the world, our widely dispersed population, a lack of exciting content driving people online and the fact that most of the country is hooked on flat-rate, dial-up internet access.

No mention that Telecom's monopoly allows it to set an inflated price for broadband and ensure its competitors never get the upper-hand by forcing them into miserable wholesaling deals.

"There are no real barriers to take up," says Theresa Gattung, Telecom's chief executive.

"Although of course, our deployment of broadband access technologies in areas of lower customer density must be economically viable," she adds.

For small businesses which can't afford Telecom's expensive frame relay or direct data services, the Telecom's DSL (digital subscriber line) services are an alternative.

After the numerous DSL outages on Telecom's network, a lot of Jetstream customers would have thrown in the towel - if there was anywhere else to go. Data is a nice little earner for Telecom bringing in $253 million in the half year to December 31, 2001.

But everyone else is lining up for a bigger piece of the action. TelstraClear, Ihug, Walker Wireless, United Networks - even Fonterra, which plans to deliver wireless telecoms and internet services to its 13,000 farmers.

The problem is none of these companies can gain a foothold against Telecom. TelstraClear can't even settle on a price for a network interconnect deal with Telecom, leaving the country's second biggest telco and its thousands of business customers at risk of having the plug pulled.

What's the biggest issue facing TelstraClear in the broadband market? "Unfortunately despite millions of dollars of investment, TelstraClear's own network cannot today reach many homes and businesses. We are largely reliant upon using Telecom's network and to date that has not been available for broadband services and certainly not at an economic price," says chief executive Rosemary Howard.

She blames the situation on "the lack of a supportive legal and framework to address market failures in the industry" - a situation TelstraClear believes is changing with the introduction of the new Telecommunications Act.

The legislation mandates a review within two years - of local loop unbundling allowing TelstraClear and others access to the "last mile" of Telecom's network. In theory, unbundling would level the playing field for Telecom's competitors.

Meanwhile, the Minister of Communications, Paul Swain, seems more interested in "wireless local loop" alternatives. The Government has an asset in the national network of BCL, TVNZ's broadcasting arm, which could potentially allow wireless providers to provide nationwide telecoms and broadband services largely independent of Telecom.

Many question whether Swain has done enough to create an environment that will stimulate competition longterm. Most applaud his move to inject a measure of re-regulation into the industry but time will tell whether his strategy for broadband has the desired effect.

One stoush that's long overdue

We've heard Communications Minister Paul Swain's rhetoric, watched the Knowledge Wave discussions on TV, now it's time to take a leaf from the Australians' book - let's start shouting at each other.

That's what's been happening across the Tasman where broadband uptake is almost as sluggish as it is here, with much of the blame being put at the feet of Telstra and Optus for their broadband pricing and often patchy service.

But a groundswell of public debate surrounding ICT issues may have given telcos and the Australian Government the shakeup it needs to start paying high-speed internet access more attention.

Last month's World Congress on IT held in Adelaide saw business leaders and politicians face off over the country's ICT framework. First it was the Commonwealth Bank of Australia's managing director David Murray attacking Microsoft, then Telstra boss Dr Ziggy Switkowski fending off criticism from the IT industry.

The bun fight led Prime Minister John Howard to admit that broadband had been overlooked. He vowed to set up a joint government-industry panel which would ensure the social benefits of broadband "were captured and used for the benefit of the entire Australian community".

Telstra answered its own critics by unveiling an A$50 million bundle of grants for broadband content developers, challenging vocal critics like Microsoft to match that. But as the finger pointing reached its climax, the real issue was somewhat obscured - that a decent ICT framework is needed to allow businesses and the government to become faster, more efficient and give Australasian companies better reach into overseas markets.

The belated moves by the Australians to kickstart broadband development are yet to be adopted here - but are sorely needed.