Labour aims for cheap, fast internet

Labour is adding cheaper and faster high-speed internet to its list of election promises with a policy announcement today that aims for $1-a-day access and that pledges to get tough on Telecom.

The policy suggests a regulatory review of Telecom's wholesale broadband business that would bring New Zealand's regime in line with many other countries and drive down prices.

Telecom had agreed to sign up 250,000 residential broadband customers by the end of this year, with a third of them coming through wholesale resellers such as Slingshot or Orcon.

Although the first goal is likely to be met, the second one is improbable.

The company announced last month that only about 15 per cent of customers were coming through wholesalers.

Communications Minister David Cunliffe said yesterday that his review would kick in if Telecom failed to achieve either goal. Meeting the one-third target was unlikely.

Mr Cunliffe said high-speed internet was necessary for New Zealand to realise its economic and social goals, and that cracking down on the wholesale market was key to spurring the competition that would speed its uptake.

Getting the price down to $30 a month or about $1 a day was an important psychological barrier that would make broadband more affordable.

That price would also be more in line with other OECD countries. Basic broadband plans in New Zealand cost around $40 a month.

"Both Australia and the UK have worked towards regimes where the wholesale department of the incumbent has to treat others on the same basis that it treats its own retail arm," Mr Cunliffe said.

"So [the policy is] pushing wholesale disciplines further than they have in the past."

He stopped short of calling for an outright splitting up of Telecom, but suggested that a "Chinese wall" arrangement could result through amendments to the Telecommunications Act.

"The ultimate extreme of that push is some form of separation and we're not signing up for that at this point. But we are saying that we're going to seriously look at how far we will go."

Mr Cunliffe also said it would be prudent to start planning the possible amendments ahead of time.

"I'm not going to wait until December to start thinking about it," he said.

Critics of the existing wholesaling regime say the Government handcuffed itself 18 months ago when it decided against unbundling the local loop - industry parlance for allowing Telecom's competitors access to its networks.

The Government instead allowed Telecom to institute an "unbundled bitstream service" wherein the company could dictate download and upload speeds to its wholesale customers.

That has resulted in a dearth of product differentiation, high prices and a lack of true competition, critics say.

New Zealand lags behind the rest of the OECD in broadband uptake, sitting at 22nd out of 30 in rankings.

Australia ranks just ahead of New Zealand, at 21st, but is pulling ahead quickly because of recent moves that improved broadband wholesaling.

About 60 per cent of Telstra's customers come through wholesale, Mr Cunliffe said.

His policy did not specifically include reopening the unbundling issue, but "we are going to make sure the wholesaling provisions work".