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Telecom makes a mockery of determination

Telecom makes a mockery of Commission determination with plans to strand competitor investment in exchanges

CallPlus concerned that Telecom held back on details of investment plan to prevent competition and maintain their monopoly.

New Zealand, Auckland, Wednesday 21 November. Telecom today announced a huge ramp up in its cabinetisation plans which will see over 2,000 roadside cabinets deployed over the next 2 years.

However this is a major blow for its competitor’s investment plans to place cabinets in exchanges. By deploying cabinets on the roadside Telecom will effectively cut-off customers from the exchanges, thereby stranding any equipment that competitors have deployed and making unbundling the local loop redundant.

“This is a major programme, from our estimates over 50% of our customers will move to cabinets in the next two years making the business case for competitors to put equipment into exchanges uneconomic in the majority of cases.” says Martin Wylie, CEO of CallPlus. “It raises some serious questions about Telecom’s behaviour and claims from the new management that their attitude to competition has changed.”

The industry and the Commission worked on unbundling access to exchanges, ahead of access to cabinets, because this was where the benefit could be most quickly realised. Telecom has been involved in 18 months of discussion with the Commerce Commission and its competitors working out the basis on which competitors can access Telecom’s exchanges. This month the outcome was the Commerce commission’s final determination on unbundling the local loop.

“With the ink is still drying on the document, Telecom’s move makes a mockery of the Commissions determination” continues Wylie. “Telecom won’t win any friends having sat through 18 months of discussions, claiming to have their resources stretched by operational separation, committing to unbundling a mere 15 exchanges per quarter and threatening an investment drought if the prices were too low, without disclosing that all along they had an aggressive cabinetisation plan in their back pocket.”

Installing a cabinet would involve the same sort of effort as unbundling an exchange, it is not a simple exercise. The target was 15 exchanges unbundled per quarter and now Telecom announces over 2,000 cabinets in 2 years.

A programme of this scale will have been worked upon for over 12 months. Why on earth didn’t Telecom disclose their plans? Why have we all wasted 18 months when we should have focussed on different issues?” There is only one answer – the delay to competition suited Telecom.

The Commerce Commission and the Minister need to act quickly.

  • The proposed design of the cabinets will need to be disclosed and reviewed by the commission to ensure that it has room to accommodate competitor’s equipment.
  • The Minister needs to ensure that competitors get access to cabinets on the same basis and at the same time as Telecoms wholesale business. This is the fundamental principle of equivalence.
  • The announcement of the charges for wholesale broadband due out on the 5th of December will be even more critical for competitors; if LLU plans are slowed then competitors will rely more heavily on wholesale broadband in the interim.
  • ‘Enhanced’ broadband, which supports voice and real time applications, needs to be delivered earlier. If Telecom has the resources to deploy over 2,000 cabinets over 2 years it should focus on delivering enhanced services to wholesalers ahead of the proposed September 2008 deadline.
  • There will also need to be a review of the issue of ‘dual feed’ to exchanges which allows equipment in exchanges to operate even though cabinetisation has occurred.

Telecom will be hoping that New Zealanders take the view that – “Whilst it has taken the threat of competition to force Telecom to invest isn’t it good news that they are cabinetising?” What needs to be remembered is that if Telecom invests in a huge deployment of cabinets to stop competitors building in exchanges we will continue to rely on Telecom’s monopoly network to deliver services and the end result is that consumers will continue to pay high prices for those services in the absence of any competition.


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