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UCLL determination puts questions on investment

UCLL determination puts big question mark around investment

Today’s decision by the Commerce Commission to increase the fee other providers must pay Telecom to access the Telecom network has put a big question mark over Orcon’s plans to invest in a world class network – one that would finally deliver true Broadband.

Orcon, who is currently involved in UCLL trials in 5 exchanges, where customers are getting speeds of up to 20Mbps, stated in July that it was 'cautiously optimistic' about local loop unbundling following the Commission's draft determination which set the monthly access fee for urban lines at $16.49, and non-urban lines at $32.20.

"The final determination increases the cost of a line by more than 20% in urban areas, and 14% in rural areas" said Scott Bartlett, Orcon Chief Executive, "that raises some serious questions about our ability to go beyond the 5 trial exchanges we have now invested in infrastructure in"

The Commission's final determination has increased the fees that access seekers must pay Telecom for both urban and the already high non-urban lines.

“The prices at $19.84 for urban lines and $36.63 for rural lines are a dramatic increase from the draft, and will stifle investment by Telecom’s competitors,” Bartlett continued.

New Zealand is currently ranked 20th out of 30 in the OECD for broadband penetration. When LLU was announced last year, the Government stated its aim was to propel New Zealand telecommunications services performance into the top half of the OECD by 2010. This goal seems unachievable with the prices released today because Telecoms competitors will be reluctant to invest and effectively compete with Telecom.

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"New Zealanders are crying out for a true alternative to Xtra and Telecom, you just have to look at the Consumer Magazine ISP survey released this week to see that. The Commission should be doing all that it possibly can to ensure that providers are able to deliver what people want" continued Bartlett.

The Determination will also affect investment plans well into the future. Sub-loop unbundling, which provides better speeds to customers, requires the development of a customer base prior to investment. “The high LLU price strongly impacts the ladder of investment, and will also affect our business case for sub-loop unbundling in the future” Bartlett said.

While Orcon is in 5 exchanges for the LLU trial, Bartlett says Orcon not be making any final investment decisions until after they have digested the Commission’s Determination and seen Telecom’s cabinetisation forecasts on the 23rd of November. The cabinetisation forecasts denote the exchange areas in which Telecom intends to install roadside cabinets, effectively reducing the number of customers a competitors network could serve. “We hope these forecasts are more promising for the business case than the Determination has been” concluded Bartlett.

Orcon is New Zealand's 4th largest ISP, and the third largest internet wholesaler in New Zealand. Currently Orcon employs over 100 people in New Zealand and provide services to over 100,000 New Zealand businesses and homes. In addition they maintain a small presence in Australia for trans-Tasman corporate clients. Recently Orcon became part of the Kordia Group.


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