Telecom Says Only A Fresh Approach Will Bridge Future “Broadband Investment Gap’’

Telecom says New Zealand faces a massive $1 billion broadband investment shortfall if the right policy settings aren’t put in place. This gap will only widen if the investment doesn’t occur soon.

Telecom today submitted its proposed structural separation package to the Government.

Chairman Wayne Boyd said Telecom’s proposal is simpler, more sustainable and more pragmatic than the MED proposal.

“The MED proposal is fundamentally unworkable and ignores the fact that significant new investment is required in order to meet stated policy objectives.” he said.

The Government’s Digital Strategy Objectives aim to have 90% of New Zealanders receiving 5Mbps broadband by 2010. To make this happen will require investment of at least $1.5 billion. But Mr Boyd said under the MED’s proposed regime, Telecom could only invest one third of that.

“In real terms it will mean 50% of New Zealanders will get fast broadband access, but not the 90% the Government wants.”

“The MED proposal would tie up Telecom and the industry with excessive regulatory complexity and cost.”

“This is about return on investment. Investment requires certainty and confidence and no company can invest if the returns are too low and the risks too high.”

Telecom says only a fresh approach to regulation will bridge the investment gap.

The company’s submission puts forward a very different approach. It includes: • breaking out Telecom’s fixed line bottleneck network into an independently run separate company • a simpler form of operational separation for the remainder of Telecom’s business, resulting in faster delivery of regulated wholesale broadband services • tighter coordination of future regulatory priorities and activities

Mr Boyd said the three elements needed to be read as a complete package.

“New Zealand has some hard choices to make around investment and affordability. We’re asking the Government to take another look at this. I f it sticks with the MED proposal, the Government will be regulating for the perceived sins of the past without creating the policy settings to encourage the investment that everyone agrees is urgently needed.”

Mr Boyd said in the United Kingdom, where the so-called BT model of regulatory reform has been in place for nearly two years, the same warning bells are ringing. An independent British report released last week said there seems to be little prospect for the widespread deployment of next generation broadband access networks because large scale investment couldn ’t be justified.

Under Telecom’s proposal the independent network company (Netco) would negotiate a regulatory contract with the Government that would identify upfront the services to be provided, the prices that can be charged and the investments to be made. Netco will also treat all customers equally, including Telecom.

“This proposal is pro investment and pro competition. It’s a pragmatic response to the commercial realities facing the industry.”

ENDS

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