Paul Brislen: Hamstrung by Telecom timing

COMMENT

The problem with Telecom's new broadband plans is not the plans themselves - far from it. The plans offer the sorts of speeds and price points we've been hoping for since 1999 when JetStream was first launched.

The big problem is timing. Telecom is launching the retail version of these plans in a month, but the wholesale version won't be available until next year. So for the next six months at least Telecom can soak up the eager broadband market with no fear of competition, except from non-Telecom offerings such as Woosh, Wired Country and TelstraClear's cable networks.

Overseas, regulators take a dim view of such shenanigans. Retail and wholesale must go hand-in-hand and in Japan the regulator goes further with its "asymmetrical regulation", which insists the wholesale offer be introduced to the market before the incumbent launches its retail offer.

Unfortunately, that's not likely to happen here. The regulator, Douglas Webb, has indicated that the only service he's going to regulate at the moment is an entry-level broadband service that runs at a minimum of 256 Kbps (kilobits per second) download speed.

That's around one eighth the speed of Telecom's fastest retail plan. Worse than that, the regulated plan has a maximum upload speed of only 128 Kbps, making it useless for anything but surfing the web and email.

When I spoke to Webb about the idea of retail and wholesale parity, he suggested it wasn't something the Commerce Commission would be considering any time soon. To date, none of the internet providers have gone to the commission seeking a regulated wholesale service so, technically, his hands are tied. When I pointed out that Telecom was launching newer, faster services beyond the regulated limits, he said, "But that's a good thing." Well, yes, it is, but only if it's available to all parties on a fair and equitable basis.

So, on the one hand the plans themselves are great. Finally users can buy a fast connection - 2 Mbps - that won't break the bank. I used to have Telecom's original JetStream plan that ran at roughly that speed but had a traffic limit each month of 1GB of data and I paid extra for everything I used above that cap. The new 2 Mbps plan allows for 10GB of traffic, far more reasonable, and then either a speed reduction to 64 Kbps or an excess charge of 2c/MB. That's much more acceptable than the 20c I was paying.

On the other hand, the ISPs can only sell the new plans as part of a reseller agreement. That means Telecom sets the margin they will receive, and that's not high, and the ISPs have no control over the service. So they can't add in quality of service standards, can't buy their bandwidth from another provider and so on. Telecom will retain control of the whole market for another year. The wholesale regime, as it stands today, isn't worth the paper it's written on as the ISPs look at the problem of trying to differentiate between themselves on a service level that is vastly less exciting to end users than Telecom's offer.

Telecom needs the ISPs on side to help it reach its goal of 250,000 broadband residential users by the end of next year.

It promised the Government it would hit that target and the Government, in the form of minister Paul Swain, has hinted broadly that if Telecom doesn't reach that goal it will step in and get the commissioner to look again at forcing Telecom to allow its competitors to use its network.

Telecom could probably reach the target all on its own, but that would be almost as bad an outcome as not reaching it. It would mean Telecom controlling the entire broadband market save for a few exceptions.

The commissioner has to become more proactive on this and other issues. Between this retail-versus-wholesale issue, the Telecommunications Share Obligation wrangle and the matter of number portability, there are plenty of big-ticket items to look at. The sooner the better.

* Email Paul Brislen