KEY POINTS:
A degree of doubt was bound to accompany Telecom's commitment to roll out high-speed broadband services throughout the country. The company's record ensured as much. It was a sentiment that the Communications Minister was keen to address. "For the cynics out there who say they've heard it all before [from Telecom], you haven't, because there hasn't been a plan this aggressive, or one that has been offered in legally binding terms," said David Cunliffe.
He is right. Telecom's draft undertakings, and the hefty fines for breaching them, promise to deliver what the company describes as a "world-class next-generation network". It plans to spend $1.4 billion over the next five years on a broadband network capable of delivering up to 20 megabits per second to towns with 500 or more phone lines. That compares with the current average of 2 to 3Mb/s. The upgrade will involve laying fibre cables to many smaller centres and extending fibre closer to homes and businesses to improve speeds, enabling customers to use services like voice-over internet protocol, or phone calls over the internet.
The roll-out of fibre is particularly significant. It promises speed, the absence of which has become a huge bugbear for customers, whether business or residential. Yet, despite the size of Telecom's commitment, it received only a conditional tick from the Telecommunications Users Association. That is probably understandable, given Telecom's history of unresponsiveness and unfulfilled promises. This undertaking has been delivered as part of a deal with the Government in which Telecom will be split into separate network, wholesale and retail businesses in order to increase competition. It was only six months ago that the company was adamant the Government's strategy would not work.
Telecom chairman Wayne Boyd said then that the company would not invest in a next-generation network if the Government pursued operational separation. This, he said, would not provide the return needed to justify large-scale investment in the broadband network. There appears to have been a tidal change since then. Most notably, Telecom has appointed Paul Reynolds as its chief executive, partly because of his experience in operational separation with British Telecom.
He said the change of heart followed a "replanning process". But, hopefully, it is part of a fundamental change for Telecom. Mr Reynolds says he is keen on implanting a customer-centred focus. The company would also see possibilities, where once it was interested only in holding on to what it had. In tune with that, Mr Reynolds said the next-generation network "would rationalise and future-proof Telecom's infrastructure and provide greater opportunities for its wholesale and retail businesses".
Notably, however, he also indicated some tough negotiating lay ahead. The final price for wholesale broadband services and local loop unbundling would be a crucial ingredient in the plan to build the high-speed network, he said. The Commerce Commission's suggested price for access to Telecom's local network alarmed the company as much as it satisfied its rivals. Mr Reynolds has indicated, fairly enough, that if Telecom has turned a corner, it is not about to be a patsy.
Clearly, there is some concern about the extent of the company's commitment. Its share price dropped 11c on the day on which the draft undertaking was made public. There are bigger issues at stake here, however. These include the demand for high-speed fibre networks and connections to the rest of the globe. What was tolerable to New Zealanders only two or three years ago no longer suffices. Telecom must meet that challenge. This undertaking is a satisfactory start.
