KEY POINTS:
My dream scenario for telecoms and phone services could be a reality by the end of the year. That's because Telecom and its rivals have agreed terms for what is known as naked DSL, which effectively allows you to have broadband internet without having to pay for phone rental as well.
Currently, the two are inseparable, no matter what internet provider you're with. If you make all of your phone calls using your mobile and simply want your phone line for internet access, that's too bad - you're lumbered with the phone line anyway, and the $43 a month line charge.
The pricing of naked DSL has yet to be finalised and that will have a major bearing on the success of the service, which will be offered by Telecom in its basic form from September. But there's enough evidence overseas to show that when priced right, naked DSL services can be popular.
Norway was one of the first countries to offer broadband-only services when Telenor went to market with naked DSL in 2003. It started charging other providers 7.5 euros per month for access to a "naked" phone line, rather than 19.7 euros per month with a phone service included. Within 18 months of launching, 7 per cent of Telenor's customer base comprised naked DSL subscribers.
Here's why it's such an attractive option - fixed to mobile phone substitution. As bundled minute deals from mobile operators become more competitive and people increasingly use text messaging, instant messaging email and internet telephony to communicate, the case for keeping up that phone line rental is looking more marginal by the day.
With naked DSL you could, in theory, buy a broadband package from Slingshot and use your Vodafone mobile for calling, cutting out the phone line rental component.
For long distance and international calls you could use Slingshot's voice over internet protocol phone service, which is charged at $10 a month and 5c a minute to numerous overseas destinations. There's huge opportunity for Telecom's competitors to offer a new mix of services that don't necessarily include the phone line rental component.
But naked DSL isn't necessarily bad news for Telecom, which may, in fact, be in the best position to exploit the mandated service.
"Naked DSL could result in Telecom regaining market share from Vodafone through the introduction of quadruple-play [broadband internet access, fixed voice, mobile and TV] bundles," wrote telecoms consultancy Network Strategies in a report written last year for the Ministry of Economic Development.
I'm increasingly hearing people say they would like to just buy broadband and mobile services from their telecoms provider and drop the phone line along with its monthly rental fee.
Telecom could easily come into the market with a deal bundling broadband, 027 mobile phone account and even a VoIP service.
If Telecom is smart, it will be able to replace any of the revenue lost when people cancel their phone lines with new revenue streams generated by attractive bundles that offer the customer more flexibility. Throw new services such as IPTV into the mix and there's even the opportunity to gain additional revenue.
So how soon will naked DSL take off? That will depend on the wholesale pricing of it and there are a few kinks that will slow its take-up.
One major factor tying people to their monthly phone line rental is the knowledge that if all else fails, the power goes off, your computer crashes, you can still pick up the phone and get a dial tone. That's a powerful safety net, especially for people who rely on their phone for business or are in outlying areas and need to be able to use their regular phone to report an emergency.
Until there's greater confidence in the reliability of VoIP services or people are comfortable using their mobile as their primary phone, we'll be beholden to that $43 a month local calling fee.
Hundreds of thousands of customers who subscribe to Sky TV's pay TV service also rely on their phone line to allow Sky's interactive services to work. Doing away with the phone line would kill the interactive options available to a Sky subscriber.
Then there's the thorny issue of the "Kiwi Share" or the telecommunications service obligation (TSO), as it is known.
A Government provision that ensures every copper line connection in the country can provide phone calling and dial-up internet access, the TSO isn't a good fit with naked DSL. That's because the voice component of a naked DSL line is removed, making it unsuitable for regular voice calling.
However, under the terms of the TSO, Telecom still has to maintain that line and the equipment at either end of it, so that it can still be used for voice calling and basic internet access.
That means naked DSL services will have to subsidise the considerable annual cost of the TSO, unless the Government changes the terms or scraps the TSO altogether.
Whatever the case may be, most analysts agree that the availability of naked DSL will stimulate broadband uptake and give consumers more choice when it comes to telephone and internet services. The sooner the ball is rolling on naked DSL services the better, so the benefits of unbundling can begin to be realised.
