Telecom stifling market says analyst

By PETER GRIFFIN

Telecom's desire to protect its half-billion-dollar data business from being cannibalised is stifling the take-up of broadband services, says telecoms analyst Paul Budde.

Budde, a perpetual thorn in Telecom's side with research picking holes in the telco's strategy, argues that the company's lion's share of the data market is a disincentive to increase the market for cheaper DSL-based services.

Telecom's New Zealand Wireline business generated revenue of $502 million in the year to June 30, a figure made up of digital data service, Lanlink, leased data, frame relay, IP Net/Netgate, ISDN and "other data". ADSL contributed just $32 million to the total.

Budde said Telecom held around 75 per cent of the fixed-line data market, much higher than Telstra's market share in Australia, and was hell-bent on protecting its data revenue base for as long as possible.

"Because Telecom has such a big data market share, if broadband is introduced, it is a real threat," said Budde.

"The same thing happened in Australia. Telstra was pestered into it, ministers were complaining, Bill Gates was complaining. It was only after that, penetration went up."

Lowering Jetstream prices and removing data download caps would see many businesses move off more expensive data plans but would increase the market overall, said Budde.

He estimated there was pent-up demand for 250,000 broadband connections in the New Zealand market.

Pricing and the risk of over-running download limits were factors stopping people shifting from dial-up to DSL.

"People hate uncertainty, that's the biggest inhibitor [to broadband take-up] in New Zealand."

Visionary leadership was needed to make the changes necessary to stimulate broadband.

Budde said British Telecom, under the guidance of chief executive Ben Verwaayen, had got serious about broadband and now was the telco to watch and learn from.

BT this year unveiled big cuts in the prices it charged internet providers seeking to wholesale its broadband services. Last month it established a high-level management position overseeing broadband development.