Telecom NZ slams separation proposal

Telecom New Zealand has described a government proposal for its operational separation as unworkable and overly complex. The country's Communications Minister, David Cunliffe, last week called for comment on a draft proposal that would -- as the Australian government is doing with Telstra -- split Telecom into three divisions focused on retail, wholesale and network access services.

Telecom New Zealand has described a government proposal for its operational separation as unworkable and overly complex.

The country's Communications Minister, David Cunliffe, last week called for comment on a draft proposal that would -- as the Australian government is doing with Telstra -- split Telecom into three divisions focused on retail, wholesale and network access services. United Kingdom incumbent telco British Telecom has also recently undergone a similar separation process.

"Our principal concerns are that the consultation document released last week proposes a very complex form of separation that goes significantly beyond the BT model, and in our opinion fails to address important questions around investment," Telecom chairman Wayne Boyd said today in a statement.

"The emphasis on a strict form of separation is inconsistent with the desire of our wholesale customers to see new regulated services placed into the market as soon as possible. The complicated separation requirements add unnecessary cost, and propose governance arrangements that are unworkable within a single entity."

Boyd claimed the proposed Access Network Services unit was a bad idea because it had no capability or incentive to make network investments, at a time when New Zealand needed significant funds ploughed into broadband infrastructure.

Telecom also stated the government's model would consume specialist IT resources that would otherwise be deployed to enhance network offerings for wholesale customers or the telco's own retail arm. The telco also feels delivery timeframes for the plan are unrealistic.

A better model?
Telecom has instead proposed a different, structural model of separation that would see just one separate company created -- a corporation the telco has dubbed "Netco".

Netco -- which could be owned by Telecom, be an independent entity or owned by a coalition of industry and the government -- will own Telecom's fixed copper access network outright, and sell access to any telco that wanted it.

Like Telstra and a group of its rivals known as the G9, Telecom is interested in rolling out fibre-based broadband further into its country's streets.

"This model should accommodate future technology changes and likely fibre to the node deployment scenarios," wrote Telecom. "This is important because of a looming dilemma between fibre to the node deployment and local loop unbundling/LLU [copper] investment by competitors."

Fibre to the node rollouts by Telecom (and in Australia, by Telstra or the G9) have the potential to strand existing broadband infrastructure which has been installed in telephone exchanges.

Telecom promised its "simpler form of separation" would more quickly deliver to the market copper-based LLU broadband services (which are used by rivals), and naked DSL services that can be purchased by customers without the traditionally bundled fixed line voice service.

"At the moment, we have real concerns about our ability to deliver these quickly, given the competing priority of putting operational separation in place at the same time," Telecom said.

The telco added a regulatory package including a simpler separation model, in addition to favourable pricing of wholesale services, equal network access terms with rivals and the promise of future de-regulation in the telecommunications sector would lead Telecom to make long-term commitments to investment in infrastructure.

Telecom said its model would be a sustainable form of separation that could cope with future technology developments, in addition to leading the way to better competition and network investment.

In addition, it "would avoid the likes of the apparent stalemate that is occurring in Australia in respect of these issues," Telecom said, referring to the ongoing Australian debate about how a new national fibre network would be built.

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