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Act May See A Return To Dark Days

Act May See A Return To Dark Days

The Telecommunications Amendment Act, on the face of it, promises an environment where new telcos can invest and deliver world class broadband to New Zealanders. Ominously, a press release from Telecom on cabinetisation, due out this Wednesday, may signal a return to the dark days of Telecom holding the keys to the network and to New Zealanders’ entry into the digital world.  

The Act seeks to separate Telecom into three units; Access Network Services, Wholesale and Retail, and enable new telecommunications companies equivalent access to the network so that they may compete on a fair footing with Telecom Wholesale and Telecom Retail.  The public has until the Friday 23 November to make submissions to the Ministry of Economic Development on Telecom’s plan to meet the terms in the Minister’s (Operational Separation) Determination. 

As part of the process to implement the Act, the Commission released its final Local Loop Unbundling (LLU) Standard Terms Determination earlier this month, allowing Telecom’s competitors to get access to Telecom’s local network.  A clause in the in the LLU Determination requires Telecom to give 24 months’ notice of their plans to build these roadside cabinets.  Cabinetisation is the placement of roadside cabinets between the exchange and the customer, with fibre running from the exchange to the cabinet, and copper or fibre running the last mile or so to the customer. 
Orcon Chief Executive Scott Bartlett says that Telecom’s cabinetisation announcement will be an acid test for the new Telecom operational separation  

“If Telecom’s Access Network Services do not follow the principles of an operationally separate model, then cabinetisation plans will favour Telecom Wholesale and prevent new telcos, like Orcon, from installing their equipment on day one - or at all - in the exchanges and roadside cabinets,” says Bartlett.

“A likely scenario is that Telecom will announce an aggressive cabinetisation plan in the order of 3000-4000 cabinets over the next two years.  In this event, investment in the existing copper local loop network, from the exchange to the customer, will be redundant,” he said.

Telecom Wholesale’s equipment is also stranded by cabinetisation but, without equivalence and sub-loop unbundling, only Wholesale is given access to those roadside cabinets. 

“The only reason Telecom would cabinetise so aggressively is to prevent competition and continue their monopoly on telecommunications services.  It would make the whole regulatory process for LLU redundant,” Bartlett continued. 

“Effectively we will be back where we were 18-months ago with no incentive for competitors to invest, and no innovation, resulting in poor broadband services and high prices for consumers.”

The Act also included other initiatives to encourage competition, including sub-loop unbundling, which will allow competitors to also have access to Telecom’s cabinets and customers from those cabinets.  However, the regulatory process for sub-loop unbundling has not been initiated by the Commerce Commission. 

“If Telecom announces extensive cabinetisation plans, without a firm commitment to allow equivalent access to the exchanges and the roadside cabinets, then the Commerce Commission should step in immediately to commence the process of sub-loop unbundling.  They need to protect New Zealanders’ rights for increased competition.”

The intent of the clause requiring Telecom to provide 24 months’ notice was to protect the investment of competitors for two years.  Bartlett says that Telecom is able to cabinetise wherever and whenever it likes, and therefore prevent competition.   “The Commission needs to amend the clause so that any investment by competitors is protected for two years,” he adds.

At the moment Telecom’s separation plan does not include equivalence for the sub-loop, even though it was included in the Act as a regulated service 

“Cabinetisation could provide real benefits for consumers if all of ANS’ customers had access to the end-users served from cabinets,” says Bartlett.  

“The government should amend the separation plan so that competitors and Telecom have access to those cabinets at the same time, and on equivalent regulated terms. 

“This would give New Zealanders the real benefits of competition such as innovation, better services and lower prices,” concludes Bartlett.


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