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Jury Is Out On Local Loop Unbundling

The Communications Minister Paul Swain says a report on unbundling the local loop shows the jury is still out on the issue.

‘Unbundling local loops lets telecommunications companies rent the individual copper phone wires to the customer premises from the incumbent telephone company," Paul Swain said.

‘It is seen as a means of increasing the level of competition in telecommunications services, particularly telephone access and high speed internet access, and is being introduced in a number of OECD countries.

"Local loop unbundling is one of the many competition issues facing the telecommunications industry, others include number portability and interconnection" he said.

The Ministry of Economic Development commissioned Ovum Pty Ltd to assess the net benefits of introducing local loop unbundling in New Zealand.

"The Ovum report found:
 The economic case for introducing local loop unbundling in New Zealand on its own provided insufficient justification, as potential benefits were approximately equal to the likely cost.

"It did however say that there may be a case for unbundling because:
 The economic analysis did not take into account some possible additional competitive benefits…such as lower prices and quicker introduction of new and improved services that the extra competition would engender.

"It also highlights a number of important pricing and technical issues that need to be considered in implementing local loop unbundling.

"This is a useful report - it will now be forwarded to the Ministerial Inquiry into Telecommunications and I expect it will form a useful input into its deliberations.

"The Ministerial Inquiry is required to examine local loop unbundling as part of its terms of reference.

"Unbundling of the local loop is just one very technical aspect of the telecommunications inquiry which needs careful consideration and not a knee-jerk reaction that could impact negatively on the new economy.

‘The Inquiry process will allow all interested parties to comment on the Ovum report and ensure the case for local loop unbundling is thoroughly examined,’ Paul Swain said.

For electronic copies of the Ministry of Economic Development Report, ‘Report on the Case for Introducing Local Loop Unbundling in New Zealand’, 17 March 2000
AndOvum Pty Ltd, ‘The Economics of Local Loop Unbundling in New Zealand’, A Report to the Ministry of Commerce, 1 March 2000

Please contact Kerry Lamont – Press Secretary – 04 4719889/ 025 270 9106/ kerry.lamont@parliament.govt.nz

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