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Orcon Warns Unbundling a Threat to Broadband


17th Aug 2004 - Unbundling a threat to broadband

Currently the New Zealand telecommunications environment is going through a period of rapid and exciting change, and we’re very close to the point where competition in the marketplace could provide affordable broadband to the masses. Now that we’ve reached this point, let’s not take a backwards step by unbundling the local loop.

Many people consider Local Loop Unbundling (LLU) the ultimate solution, and assume that unbundling equals more affordable broadband. However few people ever stop to consider what would actually happen if unbundling occurred. The fact that Paul Swain and Douglas Webb have given some consideration to the issue ought to earn them a pat on the back – not the abuse that so often seems directed their way.

We believe, if unbundling were to occur, that Telecom would be under no obligation, and have no incentive to wholesale services to any company. Anyone that wanted to compete with Telecom would be forced to install expensive equipment in every telephone exchange and only major players like TelstraClear with pockets deep enough to invest the hundreds of millions of dollars required would survive. The net effect of this would be less choice for the end customer.

In reality, it would probably take TelstraClear 2-3 years to get the agreements and arrangements in place - allowing Telecom unrestricted and unchallenged access to the broadband market during this period.

There has been a large amount of press over the last few days regarding the proposed Telecom Unbundled BitStream wholesale broadband service (UBS), and comments have been made on the matter by Orcon, Telecom, The Commerce Commission, TUANZ and various other parties. Despite all the information there is a fair amount of confusion and concern in the marketplace.

In Orcon’s opinion the best way to deliver broadband competition is with the wholesale environment that the telecommunications commissioner has currently recommended - with some minor changes to Telecom’s current UBS proposal. That way, any number of broadband options get delivered to end customers now; this must be in the best interests of new Zealanders, and indeed the smaller players who are going to deliver these choices. Telecom isn’t perfect, but they have made significant progress with UBS, and Orcon’s recent marketing activities can attest to that.

What the industry and consumers now need is for the commission and Telecom to agree the way forward. Orcon’s fear is that the current impasse will un-necessarily delay the implementation of UBS, and potentially limit consumer choice.

With this in mind, here are the features that Orcon believes should be included in UBS:-

• No ‘Churn Fee’: Telecom has currently proposed a churn fee of approximately $100 for customers moving between providers, we feel that this will severely restrict innovation, as customers will be prevented from moving to providers who offer differentiated services.

• No 10 GB Limit: It would be more beneficial for the UBS service to be a completely flat rate service and for ISPs to be able to provide specify whatever plans they see fit.

• Better than ‘Internet grade’ quality of the service: Currently the commission and Telecom have indicated that the UBS service is to be an ‘Internet grade’ service not capable of real-time multimedia, or other latency sensitive applications. Network gaming is a key motivator for people to take up broadband. For example, Orcon has partnered with Sony to deliver their PlayStation online gaming service, and this specifically requires low latency networks to operate. If UBS was unsuitable for online gaming, we believe that there would be at least 10,000 existing gamers in NZ adversely affected.

• IP address assignment flexibility: There is no valid reason for Telecom to mandate how ISPs should assign IP addresses, and there are many good reasons why customers might require a static IP address as part of their service.

• Layer 2 access: We agree that Layer 2 access is the way to go, as proposed by Telecom under the existing UBS specification.

• Per user port and transmission charges and ubiquitous network access: Again – we agree with what has been proposed by Telecom under the existing UBS specification (A non-interconnect based wholesale model).

Seeby Woodhouse
MD Orcon Internet

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