Use advantage on broadband, Telecom urged

By PETER GRIFFIN

The future of telecommunications lies in unlocking residential broadband, says Australian analyst Paul Budde, but Telecom probably will stay the keyholder for several years.

Up to 25 per cent of New Zealand internet users would be able to afford broadband - if it was priced at $50 a month, he said.

But Telecom's focus on expansion threatened to squander the advantages it held over its competitors in the broadband market.

"Telecom could, and should, use the market advantage that it will hold for the next two or three years in the residential market to aggressively promote affordable, high-speed, always-on internet services over its ADSL network," he said.

His sentiments mirrored those expressed a month ago by Ross Pfeffer, Asia Pacific director of the Southern Cross Cable Network. He described broadband as the world's "best-kept secret" and blamed sluggish take-up on poor marketing and high pricing by Telecom and Telstra.

For competition to increase, mainly in the form of a merged TelstraSaturn-Clear operation, unbundling of the local loop would give access to Telecom's "last mile" telephone lines, substantially reducing the overheads associated with providing telecommunications services.

"The residential market is just incredibly difficult to get into," said Mr Budde. "The only real solution for the next five or six years is unbundling of the local loop."

But even an improved telecommunications regime would not provide all the answers.

"In Australia, five years after the introduction of new regulations there has been little progress." The Australian regulator, the ACCC, in September ordered Telstra to revise the wholesale pricing of its ADSL service to allow its competitors to compete in the residential market. A handful of Australian operators have embarked on local loop unbundling, putting their equipment into Telstra's exchanges, but they lack the cost advantages Telstra has.

Plans to "go wireless" to avoid last-mile headaches would not provide the answer. Mr Budde said operators such as Walker Wireless would probably remain niche-market players servicing business customers and remote areas.

The means of service delivery would be in-ground cables with data speeds of up to 45Mbps (megabits per second) within 10 years.

Overall revenue from data, internet and value-added services increased by 29 per cent this year, with 16 per cent growth forecast for next year. The market was worth $917 million.

Mr Budde estimated Telecom would increase its revenues from data, internet and value-added services by 2 per cent next year, while Clear revenues would grow by 13 per cent and TelstraSaturn and Vodafone would see 20 per cent increases.

He would like Telecom to focus on the domestic broadband market rather than expansion in Australia through its wholly owned subsidiary AAPT, which faced the same barriers as TelstraSaturn and Clear did in New Zealand.