Paul Brislen: Maybe 2005 will be the big year for broadband

This year was to have been the year that broadband really took off in New Zealand.

Telecom dodged a bullet a year ago when the Telecommunications Commissioner said he would not recommend "unbundling", which would have allowed Telecom's competitors the right to put their own equipment into its exchanges to offer their own services.

Instead, we were presented with a wholesale regime that was supposed to deliver greater numbers of users in a shorter period of time.

Unbundling - vigorously opposed by Telecom, which threatened all manner of resistance should it be implemented, up to and including the end of any investment in expanding its network - was seen to be a draconian, excessive regulatory intrusion into the industry that would not deliver service to the users for months, if not years to come.

Unfortunately, the wholesale rollout has hardly been smooth sailing either. Initially it was to have kicked off in June but Telecom and the Commerce Commission agreed instead to a September launch.

That was delayed to the end of September, then to October, and finally Telecom said it had hit a technical snag that meant it couldn't do it at all. The service finally hit the streets last month but even then it has been dogged with problems.

Users complain of being charged for the new service for up to three weeks before receiving it; of being told they will switch to the new plans but not being switched; and of being charged fees for early termination of contracts that weren't expected.

Internet providers are unhappy - Telecom is adding one new ISP to its list of wholesale providers a week and can only process a set number of its rivals' customers each month. But the latest figures show 1000 wholesale customers being added a week.

Telecom has also been aggressively marketing its broadband services with free installation and other incentives. It announced it would impose a "churn fee" on any customer moving between ISPs, which is described by several ISPs as anti-competitive.

Perhaps the biggest problem with the wholesale regime is Telecom's retail team's disregard for it. Within days of announcing the wholesale model, with its 256kbps (kilobits per second) service, Telecom said it would sell a 1mbps (megabits per second) and 2mbps plan. These won't be available as a wholesale service until early next year.

ISPs cried foul and the Commerce Commission will launch an investigation into the pricing plans after receiving complaints from ihug and TelstraClear. Both had tried to buy a wholesale service from Telecom faster than 256kbps but Telecom would not negotiate.

The commission is considering whether Telecom should be allowed to offer a retail service without providing a wholesale service at the same time - something that is required in most jurisdictions overseas.

The problem at the heart of all of this is the Telecommunications Act and how the commission is interpreting it. The light-handed regime is proving to be very light-handed and despite assurances that he would be riding "close herd" on Telecom over its rollout of broadband, commissioner Douglas Webb said he couldn't get involved in any dispute until asked to do so by one of the participants. Clearly he needs a mandate to get involved at an early stage.

Telecom has pledged to reach a residential broadband target of 250,000 customers next year and I have no doubt it will do so. The telco is nothing if not able to count.

The biggest question will be how many of those customers come from the wholesale service. Telecom and the commission agreed on a 30 per cent target, but that has been modified to include customers who are on a wholesale or a resale service. This is not what was promised and will not give a good indication of the true nature of the wholesale market.

I'm hoping we can call 2005 the year broadband really took off in New Zealand. I'm a hopeful kind of fellow, really.