Switkowski lays down challenge

By CHRIS BARTON

Ziggy Switkowski has seen the light.

The chief executive of Telstra says it's best to accept competitors as customers and is challenging Telecom to do the same.

He says Telecom needs to follow Telstra's lead and realise competition is here to stay, rather than try to frustrate it at every turn.

Switkowski was in New Zealand to check progress on the TelstraClear integration since Telstra bought Clear for $143 million in November and took on $270 million of the telco's debt.

He pointed to the wholesaling agreement Telstra has just signed with Telecom's Australian subsidiary AAPT as a way out of the deadlocked negotiations between TelstraClear and Telecom over interconnection and wholesaling agreements in New Zealand.

Asked whether the deal with AAPT was signed only because the Australian Competition and Consumer Commission (ACCC) was holding a gun to Telstra's head, Switkowski said there were other reasons wholesale pricing for broadband had been slow to progress. Those included technology problems with scaling Telstra's broadband network to cope with increased demand.

But this month the Australian regulator said it would set prices if a commercial agreement could not be reached and proposed regulating Telstra's line sharing, saying it was not confident the company would charge competitors fair prices.

The ACCC also proposed that wholesale charges for Telstra's "unconditional local loop service" should be between A$13 ($15.70) and A$35 ($42.20) a month in metropolitan areas, and between A$24 ($28.90) and A$59 ($71.30) a month in rural areas, a significant differential from Telstra's retail charges for residential broadband services, which range from A$60 to A$225 a month.

Switkowski said he would prefer to reach a commercial agreement with Telecom in New Zealand over interconnect and wholesale pricing agreements, but acknowledged that the telecommunications commissioner may have to step in because of the lack of progress.

But under the new Telecommunications Act, the likelihood of intervention by New Zealand's commissioner Douglas Webb is probably 12 to 18 months away.

So is it not entirely reasonable for Telecom to frustrate TelstraClear at every turn until that happens, in much the same way Telstra has done with its competitors in Australia?

Switkowski ducked the question, saying his previous experience working for Telstra competitor Optus gave him an understanding of "the challenger's" perspective.

"It's a whole lot better to deal with competitors. Whether we do it in co-operation or with competing infrastructure, it's going to happen."

He said Telstra started developing its wholesale market four or five years ago. It now accounted for 15 per cent of revenues and was proving a lucrative business because the costs of servicing wholesale customers were not high.

Meanwhile, the Howard Government has taken the opportunity of Switkowski's visit to New Zealand to announce plans to dramatically curb Telstra's market dominance.

Among changes are a requirement for the ACCC to establish access prices and conditions for core services, which it will use to determine access disputes.