Chris Barton: Let's free up broadband by unbundling the loop

By CHRIS BARTON

The Minister of Communications and Information Technology, Paul Swain, doesn't have fast broadband internet to his home.

I know this must be true because if did he would have seen first-hand how his policies for promoting widespread broadband are hopelessly wrong.

Why? Because my Telecom bill this month was a whopping $412.60. That's a total for my mobile, home phone line, toll calls, call minder, home 0800 number and fast internet.

It's true that I had a bad month on my mobile ($91.73), but the bulk of this damage ($236.09) came from my fat pipe connection (aka Jetstream 600).

If Mr Swain was having to pay this much, he would realise something was wrong. He would quickly find out that such prices for broadband are among the highest in the world. He would immediately see this is an enormous barrier to reaching his and this Government's goal of widespread fast internet, so we can all have the opportunity to "catch the knowledge wave".

In short, Mr Swain would understand that the monopoly on Telecom's wire to our home has to go.

But unless you're a fast internet user yourself, you won't understand. There are several reasons for this. One is Telecom's extremely complex pricing system, designed to baffle normal consumers and politicians, and even journalists.

A Sunday Star-Times article showed just how easy it is to get it hopelessly wrong on fast internet pricing. The article had the price for Telecom Jetstart at $29.95 a month. True, but it neglected to add in the second component - the internet access service Xtra Jetstart of $34.95 a month - making the monthly total $64.90.

It's also worth noting that that service costs a whopping $178 to install plus around $300 for a fast modem. The good news about Jetstart is that users can use as much internet they like. The bad news is that at 128 kilobits per second (Kbps) it's not really broadband - at least not as far as the OECD is concerned.

The Business Herald has a copy of a leaked report - The Development of Broadband Access in OECD Countries - from the OECD's working party on telecommunication and information services policies. The draft document, due for publication next month, defines the minimum speed for broadband access at 256Kbps. It also shows that Telecom's Jetstart at 5.56Kbps per US dollar comes 29th out of 35 broadband offerings compared. Not great.

For the super fast Jetstream 600 service I use, the article also forgot to include the internet service charge. But again this is easy to do. On my Telecom bill the two charges - Jetstream's $69 a month and Xtra's Velocity access of $20 a month - are separated by five pages. The total of $89 a month doesn't tell the full story, either. Unlike Jetstart or ordinary dial-up access of $25 a month - or just about all other broadband services in the OECD report - Jetstream is a metered service. Go over your 600 megabyte limit and you pay 20c a megabyte - which is why I got stung this month for an extra $117.09. (If anyone is doing the maths here, the $30 a month left over is my monthly modem rental.)

By now, most normal internet consumers and all politicians will be hopelessly confused. What the hell is a megabyte limit? Believe it or not, it's the size of every web page you download to view on screen, the e-mail you send and receive, the streaming video you watch, the streaming audio and music you listen to and the software and other files you download. Yes, Telecom counts it all.

Our 10-year-old is now spending as much time online as in front of the TV - exploring, learning or just chatting with friends. Riding the knowledge wave. But this metered chokehold is threatening to bring her ride to a halt. On our budget, it's just too darned expensive.

The OECD report says Telecom's metered charging method means the Jetstream 400 and 600 plans cannot be compared with the rest of the world. Stay under your megabyte limit and its broadband pricing looks good - very good. Which is just what Telecom wants the politicians to believe. But in reality, with this pricing regime, it's going to be nigh on impossible to find out what the real price of broadband is.

However, the report does show that Telecom's installation charge - $300 plus $50 for a network card - is by far the highest among OECD countries. So what can be done? The OECD report says the answer is simple. Create infrastructure competition - primarily by unlocking the monopoly the country's incumbent telco has on the wire from our homes to the local exchange. In telco jargon, this unlocking process has a ridiculous name - unbundling the local loop.

Basically it allows other telcos to come to your local exchange, install some equipment and - if you allow them to - take control of the wire to your home. In the process, the consumer gets choice, Telecom gets paid an agreed rental for handing over that piece of copper and prices come down.

Twenty-six of 30 OECD countries have mandated local loop unbundling. New Zealand is one of only four that haven't. Last September, the telecommunications inquiry argued to wait and see until more evidence about the benefits of unbundling was available. It also said unbundling might slow down new infrastructure investment.

A year later the picture is clearer. The OECD report has overwhelming evidence about the benefits of unbundling, how it brings about an increase - rather than a decrease - in new infrastructure, and how more competition dramatically cuts prices for consumers.

* chris_barton@nzherald.co.nz


* Peter Sinclair, WebWalk columnist since April 1997, died last Wednesday.