Telecom laughs all the way to bank

By CHRIS BARTON

A dysfunction has developed in the Government's Provincial Broadband Extension (Probe) project.

The kink came to light when Telecom announced its fast internet Jetstream for Taranaki, a move made possible only because Venture Taranaki - the regions three councils - agreed to underwrite Telecom's upgrade of 15 exchanges to the tune of $566,000.

What's wrong with this picture? First, it highlights the shocking state of Telecom's out-of-date exchanges, left to decay for more than a decade despite healthy profits from an almost total monopoly on residential lines.

Second, it demonstrates how reluctant Telecom is to invest in long-overdue upgrading in the provinces, preferring to let somebody else take the risk.

Third, it shows how out of touch Telecom is with the needs of its customers - requiring others to point out that, in today's world, phone lines need to be able to deliver fast internet, not just voice.

But that's not all. In underwriting its investment, Venture Taranaki has effectively handed Telecom monopoly control of 83 per cent of the region's internet access.

It gets a monopoly on the remaining 17 per cent courtesy of BCL, TVNZ's transmission arm, which will provide Telecom with a wireless solution.

To recap: three local authorities are prepared to shoulder an investment risk Telecom won't take; and a Government-owned organisation is prepared to provide transmission towers and expertise Telecom lacks.

In the process, a publicly listed company gets a 100 per cent monopoly for fast internet access in a region it hasn't invested in for yonks. Telecom must be laughing all the way to the bank.

But wait, there's more. Thanks to BCL, Telecom's combination of Jetstream and fixed wireless technology means it will be able to provide fast internet to all Taranaki's schools. That makes it a front runner for some of the Government's "tens of millions" it will be paying out to successful tenderers for its Probe project. More laughing, more banking.

Believe it or not, there's even more. Largely rural Taranaki is a region where Telecom will claim - despite its healthy profits - that many of its residential customers are unprofitable and contribute to its $185.6 million "Kiwi Share Obligation loss".

That's the loss Telecom says it suffers because it's required to provide untimed local calling areas. It's in the process of recovering some of that loss from other telecommunications companies. Yet more banking, to laughter which, by this time, must border on the hysterical.

But don't blame Taranaki. The local leaders quite rightly understood that broadband was a key to the region's future prosperity - and they wanted it now, not later. They looked around and realised that the only company that could rapidly deliver on their iTaranaki dream was Telecom. A $566,000 carrot was all it took.

It's not their fault Telecom had no serious competition in the region. But their actions have ensured there certainly won't be any in the future.

The lack of suitable infrastructure is an obvious inhibitor to broadband uptake, but so too is its high cost. While Telecom holds monopoly power, access prices will never come down and broadband uptake will remain low. Which is why competition is so crucial.

Sadly, the Probe tender process says nothing about promoting competition - only that tenders will be awarded on the basis of cost versus coverage versus ability to deliver.

If the Taranaki and Otago experiences are anything to go by, that means totally Telecom.

But there are signs other regions are seeing a bigger picture. Southland, the Far North and the Wairarapa have all seen and felt the lack of Telecom's investment in their regions and have devised plans to do telecommunications for themselves.

In may ways, they're turning the clock back to how telecommunications was before Telecom was sold - when its primary raison d'etre was to deliver communications to the people of New Zealand rather than profits to its shareholders. We can only hope that the Government's flawed Probe plan doesn't stuff things up.

If the regions do succeed with their plans, there is a very good argument - best put by Venture Southland - that the Kiwi Share Obligation should be valued on a region-by-region basis.

It could then be set aside as an open and contestable "Telecommunications Development Fund" to be applied to the development of services in the regions.

Such a scheme would see Telecom contract out of its Kiwi Share Obligations for regions like the Far North, Southland and Wairarapa - and the value of the Kiwi Share loss applied on a pro rata basis to the regions.

If that happened, communities would not only get back control of their telecommunications network, but also be able to do some banking and, perhaps, have a small, satisfied snigger at Telecom's expense.

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Venture Southland

ewairarapa.com

Industry NZ - The Far North Telecommunications Project