Unbundling Detail Must Heed Mobile Lessons

5 May 2006

Media Statement

Unbundling Detail Must Heed Mobile Lessons

Econet Wireless New Zealand (EWNZ) has welcomed the decision to unbundle Telecom’s local loop, but has warned policy-makers not to make the same mistakes in implementation as occurred with mobile.

“New Zealand mobile users unfortunately discovered, through the highest mobile prices in the OECD, that the devil is in the detail when it comes to telecommunications regulation,” warns Tex Edwards, Chief Project Director of EWNZ.

“Just as the entire country has recognised the need for competition in broadband services in 2006, so did the entire country recognise the need for real competition in mobile services back in 2001.

“The Telecommunications Act 2001 explicitly intended to foster real competition in the mobile market. But, thanks to enormous pressure from incumbents and last minute compromises, the Act stopped short of providing the regulator with the critical powers necessary, such as the ability to set the price and terms of roaming and co-location, to enable real competition and shelter new entrants from the predatory behavior of the incumbents.

“An example of regulatory failure is the control Vodafone New Zealand has achieved in monopolising the 900 MH spectrum, which is critical for any new entrant to deliver rural services (see chart below). This type of situation contributes to New Zealand mobile users paying the highest prices in the OECD.

“As a result of the legislative compromises of 2001, EWNZ has spent five years in farcical negotiations around roaming rights, and five years on self-regulatory bodies getting nowhere on co-location. We certainly do not wish that kind of experience on our broadband counterparts as they negotiate with Telecom on access to local exchanges,” says Mr Edwards.

“As other telecommunications companies have already pointed out Australia effectively unbundled Telstra five years ago, but thanks to inadequate regulatory provisions, it has taken that long for real service improvements and real price reductions in broadband to take place.

“The rationale behavior of the incumbent is to stall and delay through every means possible. The regulator must have the teeth to make things happen.

“The New Zealand financial market’s reaction to unbundling has also been close to absurd. Telecom’s annual report had a six page SEC risk warning that regulation may occur, and even in the IPO documents in 1991 it had a risk warning that this may happen. Vodafone’s annual report carries a four page risk warning about regulation.

“Most international investment funds will see the regulatory initiative as positive for the development of New Zealand infrastructure, and in line with the OCED normality. Evidence proves it certainly won’t scare investors, rather it will encourage them to invest in competing infrastructure,” concluded Mr Edwards.

ENDS