KEY POINTS:
Telecom chairman Wayne Boyd used the company's third-quarter results announcement to attack the Government's telecommunications strategy, saying the company would not invest in a next generation network.
He also refused to rule out breaking up and selling off the company should regulation not go its way.
This forum debate has now closed. Here is a selection of your views on the topic.
Matt of London
5 or so years ago, NZ boasted one of the highest online populations in the world (Percentage-wise). We were net savvy, and ready to join the world in its online revolution. I now live in the UK, and there is such a huge difference in internet usage here. Not only to I have trouble communicating to friends and family in NZ via VOIP (quite common over here), but the real test is that I can instantly tell when I'm looking at a webpage from home. Not only does it take a long time to load, but visually, they are still hindered by the low speeds of their audience. They cannot innovate, they cannot impress - because who wants to wait for 5 minutes for one page to load. I'm sure a huge investment is needed, but my point is that I wouldn't be surprised to hear that the poor quality kiwis are receiving has had some very real consequenses for the IT industry and growth of some internet related businesses. Someone has a great deal more than "bad deals" to answer for.
Matt R
Lack of investment? Alot of the views posted have little understanding on what "investment" means to the telecommunication industry. The type of technology involved (like all technology) is expensive, dates quickly and needs to be replaced constantly. There is no use accusing Telecom from under-investing because up until recently its sole role was to allow customers to make calls and it made a huge improvement on this since government ownership. Secondly, we were one of the first countries to have flat rate dial up. Third, ADSL (broadband) technology was expensive up until the late 90's and it was rolled out for residential use and telecom was leading the world in this respect. So why has Telecom slipped? The amount of information we all send has exploded as has the amount of people with computers. The information is also more complex - we've gone from simple emails and browsing to information heavy photos, music and movies. Why has the rest of the world surged ahead? Simple, they have the economy to do so. Telecom has invested, though only corporates that can afford the services.
Denis Muir
The position of Telecom regards broadband is indefensible-they had a monopoly and instead of investing in infrastructure to maintain NZ's position comparable to the rest of the world they concentrated on short term profit. It is a classic illustration on what happens when the executive is rewarded on the basis of short term gains. It is also a classic argument for nationalisation of a country's key assets. Shortly we will face a power crisis for exactly the same kind of reasons.
Paul H
As a Telecom shareholder I say good on Mr Boyd - a publicly listed company has a duty to act in the best interest of its shareholders. But as a New Zealander I'm getting very frustrated that the government seems to have little or no control over national strategic infrastructure.
Jeff
The Govt should be buying the lines back, even if by force under the Public Works act and then spending a few billion upgrading it. It is the best way of spending the surplus without affecting inflation, and we get a network that will ensure our economy remain relevant into the future. As a bonus Telecom is not in a position to rip us off and they are forced by completion to act fairly like any other "private business."
Colin England
Matt: That was the technology of the early eighties. It didn't support remote operation so a technician had to go around and physically wire the phone line up. This, of course, required planning around other projects and work that also was being done including connecting up other people. This older technology started being replaced in the mid eighties and wasn't fully completed until the late nineties. Most of it was replaced by 1990 before Telecom was sold in 1991. That replacement was paid for by the multi-million dollar profits that Telecom was making in the eighties. If similar investment had continued after the sale then we would actually have a first world network still.
Raj Subramanian
Infrastructure in our small country is a tricky subject. The Government showed two faces to Telecom. Initially it allowed monopoly contrary to public view and of late it woke up to completely control the organisation. Labour Governments historically used to know how to kill Private organisations. This is the best example so far.We need roads,public transport,renewable energy,Airlines, telecom and internet infrastructure. Still we need competition in those fields. But the Government is trying to get as much Govt. control and try to grab them for Government running. It is against current international trend. In spite of all these controls, still Telecom could come up with alternate proposals on broadband and wireless network without much investment and even could plead Government for any required law amendments if it is in longer term non-monopoly business plan.
UP
Look as long as there is no possible ROI for Telecom; with regards to investing in the network, they will not invest in a network which will be unbundling soon. You have to ask yourself the question, would you upgrade a major asset in your business for which your competitors are going to be using to compete aggressively with you? While your income drops, your cash reserves drop and suddenly the business model that was making you money is falling away like a house of cards. Now put yourself in Wayne Boyd's shoes you've got the Government on your back on one side demanding that this investment be done "or else..." and you've got shareholders on the other side watching to see how much they are going to loose from all of this. What do you do? Do exactly what I think Wayne Boyd's thinking of doing. Split the company up, because as a whole the expenses must be massive and the reduction in income and cashflow will drop. I reckon he should setup the Network Infrastructure as a standalone entity like the New Zealand roads. This would allow that entity to invest and to develop its own income generating services that all ISP's and Telco companies can use, leveling the playing field.
H.T.Clark
The government sold off Telecom because it was not prepared to invest the capital required to provide the technology and service level required. Telecom have done a good job in providing the increased services but have been dictated to by the government. The goverment has been influenced by the news media and other Telcos who are not prepared to front with the capital. In requiring Telecom to split its operations the government has reduced the ability of Telecom to invest. Telecom has offered an alternative which the other Telcos and goverment could invest in. Telecom should not invest in the systems if the risks are increased by government iterference and they cannot get an adequate return on their investment.
Matthew
With New Zealand so isolated geographically, fast, cheap broadband would be a such a huge improvement in bringing the country closer to the rest of the world. Kiwis seem to be forever doomed to being short changed and ripped off, whether it's music venues with lousy sound, low wages, badly made housing or backwards third world standard internet services...Isn't it time to just say "enough is enough"!
Andrew Atkin
Everything that comes out of Telecom's mouth is and always has been designed to protect its monopoly status, to the fullest degree possible. Just ignore them, kill the monopoly, and have the government invest whatever is needed to ensure that we get true high speed internet - soon. Not incrementally over 10 years - soon!
Chris
Should Telecom have to invest in the network? I have to say no. Why? They were just told they were going to be forced to unbundle. Who would invest in an open network when all the competitors are talking about building their own private networks when LLU comes into place? There needs to be an incentive for Telecom to invest in the network now - Telecom has either purchased or built its network for itself, and has now been told it needs to open that network up to competitors. Competitors are building their own networks for themselves and have the ability to use the network Telecom has solely invested in. I used to disagree with everything I'm saying, but this was before LLU came to reality. The objective of any limited liability company or corporation is to continue to operate into the forseeable future and take actions that would benefit the company in terms of profit and goodwill. How is investing in an opened up network going to do this? Are other providers investing in the same network to improve it? (I don't mean by way of their OWN dslams etc, I mean by way of linking between exchanges and having those links open to competitors etc)
Smith
Some viewers posted here that if Telecom was so important why did they privatize it? Well the fact of the matter is times have changed Telecom is no longer just about phone calls and cabling it's grow to include Broadband internet which has become almost a daily necessity to do business. It was not possible for the government to suddenly go "oh wait I think this thing called the 'internet' is coming out soon we should think again about privatizing it." Things changed just like Auckland Residents complaining to the Council about overhanging cables resembling Wellington/CHCH which influenced the Council to reject the Broadband Cable plans for Auckland. It's been 5 years since then and I'm sure a lot of Auckland residents deeply regret choosing that situation I mean if the internet works what's an extra cable hanging outside? We've already got 2-3. My own experience with internet has been this 56k -> 256k -> 512k -> 3.5mb -> 7.6mb -> 128k
From 7.6mb -> 128k because of Congestion at my exchange it's been at that speed for almost 2 months and nothing is being done about it. I'm tired of our slow internet I know you are too.
North Shore
After years of ripping off the public, Telecom continue to show preferential treatment to their shareholders rather than their customers. Threaten them with being nationalised and let's see how fast they get their act together and take us out of third world internet into the real world.
Jason Brown
Between bureaucrats with vested interests and investors with interesting investments, consumers get shafted. Let's see, badly discredited so far: 1. A purely state owned, public service managed body suffering from crippling bloat and brain numbing inefficiency. 2. A purely private entity, business managed body suffering from crippling greed and over efficiency. Might there be room for a semi-return to a publicly owned but corporate structure required to turn a profit but in the long term, not the five minute stock market version? Trouble is, like other state owned enterprises, Telecom has been hijacked by corporate interests for short term profits, not long term economic growth. Yes, profits do lead to growth. However the internet is now around three decades old and is vital to survival as roads, water and power. What really needs to happen is for debate to reframed around universally free access to the internet. After all, car owners pay an annual fee and can then drive anywhere in the country without paying tolls. Even people without cars subsidise roads, through general taxes. Why can't we do the same for the information superhighway? Sure, cars cost immediate money, for petrol, etc. But so do internet connections in terms of power, rent or mortgages. Actual connection with the network (road or internet) is free. Making lifelong education and access to information freely available through a public net might also give policy makers direct access to general populations - and vice versa. This is not a question of free market versus social welfarism - this is a question of just how far does New Zealand want to get left behind ? For a nation of supposed pioneers, airplane inventors and mountain conquerers, we seem to be awfully shy of going online. Sheesh.
Kiwi in Indian
I'm inclined to agree with Telecom as the big question here is where is the money coming from? A million dollar broadband box, or what ever it is that makes it work, still costs a million dollars whether or not a private company pays for it - or the taxpayer foots the bill. The difference is if you don't like the company then don't take their service whereas you have no choice when it comes to taxes (and please, the monopoly quote is getting old). As for the government being able to successfully manage telecommunications - two words - transit, transpower! As for all those companies waiting to invest in NZ, I'm a kiwi currently living in India and if you want a reason why global telcos wont be lining up to invest in NZ, take a look at what's happening here. On average - their are 6.5 million mobiles connected each month. Broadband currently numbers about 800,000 users - but there are a billion people here. 1 per cent of the market gives you 10 million customers! So if you were a BT, AT&t, or even a Telstra - and you had a billion dollars to spend, NZ or India? or China? or even Australia? Does the government know where the money is coming from? Get real kiwis.
PD
My heart bleeds. First Telecom NZ steals their customers blind by over-charging and under-investing. Then they have the gall to tell us that what we have here is to scratch with the rest of the world. Yeah right! I have a friend in England who has kept me up to speed with what is considered 'normal' broadband access in Europe. From what he told me over the years gone by it was plain that what we were told here were nothing less than the most bland faced lies. And now that that they have had their hands smacked and told to pull into line with the rest of the world, we now have to put up with tantrums the likes of which one would expect from a small child not getting its way. Personally I think Telecom NZ should be forced to invest one billion dollars in the NZ infrastructure between now and 2010 to make up for lost time as well as being forced to split into three divisions. My advice to Telecom: Get over it, get on with it and tell Wayne Boyd to put an end to his pathetic bleating and whining.
Johann
This must be one of the first times I actually agree with Telecom. What possible interest could they have in investing in more infrastructure if they are regulated and forced to open up their network to other market players. I think Telecom's solution of a spinoff company that owns the network is a step in the right direction. In order to truly make it work maybe there needs to be some ownership of this network access company by other ISPs (including Xtra), the government, and maybe even the public (have to be careful because we don't want this company only looking out for its shareholder's interests, but for its stakeholder's interests as well). A lot more work and thought needs to be put into this, however forcing Telecom to sink its money into something that isn't in their own interests is just wrong.
Harry
Well it has taken me 31 minutes to open this site, I think that sums it up.
Paul
When NZ privatised the telecommunications sector some year ago, they likely handed over an infrastructure that was adequate for NZ needs at the time. I understand they acquired this for more than a fair price. Telecom, as the new owner, should have taken the revenue from NZ customers and used a decent part of it to keep the infrastructure healthy and current - as would most normal businesses. Instead they seem to have taken the revenue and passed most of it onto shareholders, making little or no provision for the future of NZ. They could do this because they operated in a monopoly. Telecom has failed to look after their network. Shareholders have enjoyed many years of share growth and healthy dividends at that expense. The time has come for shareholders to be held accountable for their failure to look after the network. The government should force Telecom to sell the local loop and other network components at today's fair value. The bidders for this would be required to submit a plan for upgrading the network to move NZ forward to acceptable OECD standards. By doing this the offer price to Telecom would reflect a "truer" value of existing assets which need to be replaced - which would likely mean a significant loss for Telecom shareholders. If the situation in NZ was experienced in a business, the entire management team would be sacked for being asleep at the wheel.
John (Massey)
So Telecom is waving the big stick at the Govt over Broadband and threatening it. There is an easy answer for this,just re-nationalize Telecom without compensation. After all they have had their pound of flesh (gouged out) using their monopoly position, it can be said that they have sucked out enough of a return on their investment already. Even the Govt could make a worse mess of broadband!
Jason
The most amazingly disgusting thing here is that its right in our face; they are stealing the peoples money for themselves in further failed investments. Where is the money going - they will never say, no matter how much time passes. The proof is in the pudding if the government doesn't tear this company apart - nothing less. The selling off of parts of Telecom has come just before the rest is dissolved - the due date, just wait and see, watch very carefully - then the rich involved will disappear into other "so called" opportunities and investments. Disgusting people! Right in the publics face will they rip us off. This would be jail time elsewhere for people so carelessly ripping the public off! Who agrees? Oh yeah, everyone! As its said: we are willingly and openly using confusion marketing to rip the New Zealand public off - its normal, so we use it too. Quote!
Lewis Bradly
So much for the competition myth and private enterprise. If the company will not invest in upgrading the broadband system, then in some form the government should force the issue with Telecom and enforce adequate forward planning and investment.
John
This is the problem with privatising infrastructure, the bottom line is always profit and stuff the consumer. We need to take a leaf out of Chavez's book and re-nationalise the lot.
Winemaker (Motueka)
I agree with Wayne Boyd. What ever happened to private property rights?. The Labour government sold off Telecom to private investors. They were happy to take the investors money at the time. Now we have a thinly disguised attempt at nationalisation. If this company was so important to the country's good then why sell it in the first place! I fail to see why Telecom investors should put money into further broadband investment when the Government is setting a precedent of interfering in private enterprise.
Grahame Craggs
I find myself wondering why we are so surprised. First we flog off critical national infrastructure (rail, telecommunications etc) to offshore interests and then they proceed to milk those assets to the maximum possible and pay the dividends to their overseas shareholders. Why do we continue to kid ourselves that they will act in the best interests of NZ? They never have, why should they now?
John
When you have chief executives bonuses linked to profit and also give them chunks of shares in that company, then that will always be their driving force and not the public or the future of the business after they have left with full bank accounts. How many years has Telecom taken massive profits and not produced any meaningful advancement to the internet?. If they had taken some of those profits and invested 10 per cent of it yearly we would now have an up to date network. But instead they made huge profits at the publics' expense and the Govt stood by and did nothing until now. How long does it take to wake up a politician? The digital strategy aims to have broadband speeds of 5Mbps delivered to 90 per cent of New Zealanders by 2010. This is a major joke. I have recently moved 9km north of Taupo into a 3yr old house and Telecom inform that they don't have the correct cabling in the box for me to get Broadband, and the other day after some heated discussion was told it would cost Telecom $337,000 to put it in, so tough! I find it amazing that on the road l live there has been over the last 3-4 yrs a number of sections sub divided with approx 10 house on these individual sub divisions and so the box its self as had to be upgraded and that they didn't have the foresight at the time to make them broadband able, obviously this is a tough call for them, l was told that they couldn't tell at that time how popular broadband would grow to be. Telecom and the bosses who run it are and have just been taking the piss out the New Zealand public and treating them like idiots. We are here just to supply them with top level incomes and profit and of course a useless Govt who could never force them to do anything.
CJ from Auckland
Mr. Boyd's position is the modern equivalent of deciding not to seal roads or set up an electric grid. Just as the investment returns on roads and power lines are generally meager, there is more to the broadband network issue than one company's investment return. Developing a state of the art, nation-wide broadband network is critical to New Zealand's economic future. The return on a broadband network is measured in new & more productive companies, improved supply chains, less auto traffic, less pollution & road expense, as well as dollars. It is time for the government, and specifically the Prime Minister, to take the lead and meet with Mr. Boyd to say that a state of the art broadband network is in the national interest. Mr Boyd needs to be told that if he & Telecom are not interested in creating a modern network, that the government will solicit bids and sell the exclusive rights to build a fibre network to a firm (foreign or domestic) that is. I'm sure that Vodafone, MCI or one of several other global telcos would be more than happy to put Telecom out of our misery.
Tobes
Why would he possibly say anything else?
Mike M
This is just more of the same. Telecom will keep trying to talk its way out of any trouble for as long as it takes. They haven't changed a bit. The excuse about a lack of investment seems to be an attempt to blackmail the government into putting fewer regulations on the company. This separation offer from Telecom doesn't even seem to be half of what the government is asking of them. I expect I'll be waiting a long time before I can ditch my Telecom phone line and just keep the broadband. Mobile broadband will probably provide better competition for Telecom well before the network gets freed up.
Tom
Typical Telecom at it again, ignoring the fact that it was their under-investment in the first place that brought NZ broadband into the current situation.
Leonard Lee
Faster and cheaper broadband for everybody? Take profits out of the equation and turn it back into a state owned enterprise.
