Call for Govt to open local loop

By ADAM GIFFORD

New Zealand should end Telecom's monopoly on the "local loop" or risk falling even further behind Europe and the United States in providing fast internet access.

That is the view of Allan Fischer-Madsen, chairman of the International Telecommunications Users Group (Intug), who is here to speak at the Telecommunications Users Association (Tuanz) summit in Wellington today.

"Governments across Europe were hesitant to do local loop unbundling. They now realise they made a mistake, and as a consequence they're lagging behind the United States in getting high-speed services to everyone," said Mr Fischer-Madsen

"That's now being remedied, with the European Union passing a regulation last week to make everyone move forward."

The European Parliament voted to adopt the European Commission's proposed regulation to unbundle the local telecom loop and allow competing companies access to the "last mile" into homes.

Erkki Liikanen, the Commissioner responsible for the "information society," described it as "a major step in building eEurope."

He said the unprecedented speed with which the proposal had been accepted showed the determination of EU member countries to get the regulation - which will lead to lower internet access prices and a faster rollout of DSL (digital subscriber line) technologies - into force by year's end. But although EU member Governments have given "political agreement" to the plan, they still have to endorse it formally

Mr Fischer-Madsen says New Zealand's ministerial inquiry into telecommunications is on the right track with its prescription for light-handed regulation

"If you want to move and have competition in telecommunications, you need to do something specific to create that competition," he said.

He criticised the New Zealand approach, which left regulation to the courts.

"Traditional competition law is put in place to protect competition from subversion afterwards. In telecommunications, all countries had monopolies, so a regulator was needed to set rules before the fact, because competition won't come by itself with an incumbent in place."

The report of the ministerial inquiry, chaired by businessman Hugh Fletcher, said an electronic communications commissioner should be appointed to implement industry regulation.

The recommendation was condemned by Telecom and by National Party telecommunications spokesman Lockwood Smith, who said industry-specific regulators ended up costing consumers.

But Mr Fischer-Madsen said that was not so, as long as the system was not allowed to become too bureaucratic.

The European Union approach is to set basic rules and principles. In Mr Fischer-Madsen's country, Denmark, which is a similar size to New Zealand with five million people, the Government chose "very light-handed" regulation. "It's unbureaucratic, so anyone can set up as a telephone company and automatically have basic rights of access to networks."

Number portability was imposed in the fixed-line network, and will be introduced in the mobile network next year once technical snags are sorted out.

That increased the level of competition, so certain parts of the market could start changing suppliers, which they wouldn't have done before.

"Small enterprises like craftsmen and builders wouldn't change before, because their number was engraved on their brands - for example, the stickers sitting on people's heating system with the service number to call. That's the market you lose if you change the number. Those enterprises can now change their telephone operator without changing their stationery."

On claims that implementing the inquiry recommendations would adversely affect Telecom's share price, Mr Fischer-Madsen said international experience showed the incumbent would still have competitive advantages.

"In Denmark, we've seen our own incumbent more profitable, because the market grows faster. Our incumbent accelerated the introduction of intelligent network services. There's a lot of money to be made from smart services like call-back and automatic divert to mobile phones.

"Competition means innovation and innovation means investment, particularly as companies try to get first to market with new services."