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Manipulation exposed - will it happen again?

December 8, 2005

Manipulation exposed - will it happen again?

Today’s publication of Telecom’s threats over local loop unbundling raises serious questions about the manipulation of government by Telecom.

TelstraClear Chief Executive Allan Freeth says proof that Telecom wrote to the government threatening sharemarket and superannuation fund impacts if unbundling took place shows the power and influence Telecom wields at the expense of consumers.

“As a result most consumers continue to rely on slow dial up Internet connections and New Zealand wallows at the bottom end of OECD rankings for broadband uptake,” says Dr Freeth.

“The timeline of events and change in government direction following the Telecom letter can only mean one thing - Telecom pulls the strings. This is of huge concern given our appalling broadband performance and the government’s imminent decision on whether to force Telecom to deliver on its promises,” he says.

According to documents released under the Official Information Act, the timeline of events is as follows:

• On May 5 2004, Telecom Chief Executive Theresa Gattung wrote to the Minister opposing unbundling and highlighting that “the reality is that more than 20% of the share market is at stake”.

• On May 12, 2004 then-Communications Minister Paul Swain made a recommendation to cabinet that unbundling be referred back to the Commerce Commission for reconsideration.

• On May 19, 2004 Minister Swain presented an amended paper to cabinet with an option not to unbundle

• On May 19, 2004 the government announced that unbundling would not take place.

Dr Freeth says Telecom’s ability to influence the cabinet, not just the Minister, outside of the public consultation process raises the question of just who is running the country.

“Telecom’s promise on wholesale broadband numbers falls due in a few weeks. The government is on record as saying it will act,” he says.

“Any delays provide Telecom with opportunities for more closed door manipulation at the expense of consumers. The government should act now and proceed with unbundling.”

Dr Freeth says this proof of Telecom’s influence will create further concern for overseas investors.

“Our shareholder Telstra and others such as CallPlus already have concerns about investing here. This won’t help us one bit in terms of convincing Telstra CEO Sol Trujillo that the New Zealand market is worth large scale investment,” he says.

“All of which does nothing for consumers or New Zealand’s productivity.”

Dr Freeth says Telecom’s letter takes a cheap shot by claiming unbundling would “shift value to an Australian company” when the majority of Telecom shares are held by investors overseas.


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