Paul Brislen: Commission too slow to scrutinise deal

COMMENT

Why has it taken the Telecommunications Commission so long to get involved in the planned wholesale broadband market?

The commission has just told internet service providers that Telecom's proposed wholesale model is not the service the commission recommended and that the two differ "significantly".

However Telecom has been working since June on its proposed bitstream wholesale service and plans to launch the commercial service in the middle of September.

Plans are well advanced and most of the country's providers have signed up, although almost all are still unhappy about the terms and conditions.

Telecom's service will give the providers a greater control over the connection between the customer and the internet so the providers will be able to offer a range of services.

There are some fish-hooks, of course. Telecom wants to impose a churn fee of around $100 for every customer who migrates away from one ISP to another - which I think is uncalled for.

Telecom is also imposing new terms and conditions after one of its ISP customers, Orcon, began advertising its flat rate product, and I think that needs addressing.

However, all this has been going on since June and it's only now, less than a month before Telecom will introduce the new wholesale regime, that the Telecommunications Commission has thought to publicly get involved - which is unfair to just about everyone involved.

It's unfair to the ISPs because they've been working away under the assumption that this deal is the only one on the cards.

It's unfair to the customers who are still waiting for a competitive offering and have been waiting for the past four years, if not longer, and it's unfair to Telecom because it comes so late on in the piece.

If the commission had issues with the draft proposal it could have raised them at any time in the past two months. It wasn't exactly a state secret - I've got a copy of it here on my desk - and Telecom laid out its timetable quite clearly.

This problem is partly of the commission's making in the first place. The commission released its final report recommending bitstream wholesaling in December last year and the details around its proposed service levels are best described as minimalist.

I'm usually all in favour of keeping such things brief but you do need to have some technical specifications if only to make sure the ISPs and Telecom are all discussing the same thing when they negotiate. The commission's specifications for this new service amount to four points: a maximum upstream rate of 128kbps (kilobits a second); a minimum downstream rate of 256kbps; no real-time capability (so the service won't support voice, video or online game services), and a brief explanation as to what parts of Telecom's network are included in the definition.

Telecom has gone beyond those bare figures by building a wholesale regime that works on "layer 2" of the network stack.

To the uninitiated, such as myself, network management is a black art, but I'm told layer 2 switching means the ISP gets to control the quality of service to the end user.

That's something the ISPs are excited about because they'll be able to build different services. Orcon is aiming its advertising at the high-end, heavy user market that Telecom has been reluctant to service.

Maxnet wants to build on its reputation as a family-friendly provider by building in more filtering services and I'm sure all the others will be working to offer their own particular flavours.

It's this originality that has been missing from the broadband market because ISPs were only able to resell Telecom's JetStream service in its plain vanilla configuration.

Of all the different issues the commission could be questioning Telecom about it's going to ignore the one I would have thought was most important: timing.

Telecom is already in the market with its retail equivalent of the bitstream service, known as JetStream Surf, months before the wholesale offering is finalised.

Telecom announced the product in February and has been aggressively marketing it ever since.

By the time the wholesale market does launch, and its tentative launch date of mid-September is looking shaky if the commission gets involved, Telecom will have soaked up most of the customer base.

Overseas regulators often insist the incumbent's retail product be held back until the wholesale equivalent is launched. Instead, Telecom might get even more time to secure its position.

It's a strange way to encourage competition.

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