TelstraClear will have bitstream access

20 December 2005/078

TelstraClear will have bitstream access: Commission

The Commerce Commission has released a final determination under the Telecommunications Act providing TelstraClear with regulated access to a wholesale bitstream service supplied by Telecom.

Bitstream is an input to the provision of broadband to consumers on Telecom's copper local access network. TelstraClear will combine bitstream with its own transmission and ISP services to create its own broadband services for customers.

"This decision gives TelstraClear the ability to compete and innovate in supplying broadband services across New Zealand" said Telecommunications Commissioner Douglas Webb.

"TelstraClear will be able to differentiate its services from Telecom's broadband services. The result will be more choice and greater competition."

Telecom is required to provide nationwide bitstream access to TelstraClear with the maximum downstream speed technically available (currently 7.6Mbps) and an upstream speed of 128kbps upstream, at a GST-exclusive price of $27.87 per month.

TelstraClear applied in November 2004 for the Commission to determine terms of access to the regulated bitstream service. Today's determination follows an extensive consultation process with the parties and the industry.

Telecom argued that allowing TelstraClear to provide high-speed bitstream risks degrading the quality of broadband services, particularly the services provided to rural customers. The Commission accepts that there is a risk, but notes that Telecom itself currently provides a significant number of high-speed services to retail customers and the risk will in principle be the same whether a high-speed service is provided by Telecom or TelstraClear. The Commission concluded that any risk of service degradation was outweighed by the benefits that high-speed services will deliver to users.

A copy of this decision is available on the Commission's website at: www.comcom.govt.nz/IndustryRegulation/Telecommunications/Wholesale/Whole saleDeterminatons/telstraclearwholesalebitstreamserviceap.aspx

Background

Bitstream access is a circuit provided by Telecom between an end-user's premises and an ATM switch. This circuit is used by a telecommunications provider to deliver retail broadband services. A telecommunications provider must supply other components including national and international transmission, connection to the internet and ISP services.

On 4 November 2004, TelstraClear applied to the Commission for a determination of the terms of access to the regulated bitstream service. This determination follows an extensive consultation process with the parties and the industry.

Telecom is required to provide TelstraClear with bitstream access which has a downstream speed up to the maximum technical capacity of the DSLAM, and an upstream speed of 128kbps. The availability of full-speed bitstream access will allow TelstraClear to innovate and differentiate its broadband offerings from those of Telecom, providing significant long-term benefit to New Zealanders.

In considering the benefits of full-speed services, careful consideration has been given to a risk that full-speed services could degrade broadband services to some customers located a significant distance from the local exchange. This degradation could occur as a result of increased 'noise' in copper cables sharing a common cable sheath.

The Commission has concluded that any such incremental risk would not outweigh the benefits that full-speed services will deliver to end-users. Telecom itself currently provides a significant number of full-speed services to retail customers. Any risk of degradation will be the same whether a full-speed service is provided by Telecom or TelstraClear.

Telecom is required to provide bitstream access to TelstraClear at a uniform wholesale price which does not distinguish between customer type or speed. Maximum innovation will occur where TelstraClear is not constrained by Telecom's own retail price and product differentiation strategies. The Commission has concluded that a uniform wholesale price will not remove incentives for ongoing diversity in retail broadband services available at different prices.

The Commission has determined that the price for bitstream access is $27.87 per month. The Commission deducted price elements attributable to service components not supplied by Telecom, by imputing a retail price having regard to Telecom's comparable Jetstream services. A further allowance has been made to reflect those costs that Telecom avoids when providing bitstream access at wholesale rather than retail.

Telecom is required to make available, within specific timeframes, electronic operational support systems to facilitate the efficient provision of bitstream access to TelstraClear.

Telecom and TelstraClear agree that bitstream access will be available to TelstraClear 18 working weeks after 31 January 2006.

This determination applies for two years.

ENDS

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