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Current as of 19/12/14 07:40PM NZST

Telco rivals hit speed bumps

By Helen Twose

Telecom's rivals say its decision to start upgrading its broadband network in cities will make it hard for them to profit from their own network investment while customers in more isolated areas will miss out.

Telecom said yesterday its customers in urban areas would be among the first to benefit from a $1.4 billion plan to improve broadband speeds.

The new chief executive of Telecom's Access Network Services division, Mark Ratcliffe, said the details released were for the first 2 1/2 years of work on running a fibre network closer to homes and businesses. This shortens the length of copper used to deliver broadband and voice services to customers, increasing speeds.

He said it was natural to focus firstly on the main population areas, including Auckland, Hamilton, Wellington, Christchurch and Dunedin, then build out beyond that.

CallPlus chief executive Martin Wylie said the announcement was a major blow to Telecom competitors' investment plans.

Local loop unbundling - allowing telcos to place their own equipment in local exchanges - is commercially viable in urban areas where a large customer base hangs off an exchange.

But under Telecom's plan, for some urban customers the telco will run fibre to roadside cabinets, bypassing the exchange.

This process is called cabinetisation.

"Basically it means that the exchanges we would be going to will be cabinetised, so how on earth do we get our business case to work under those terms?" said Wylie.

He said Telecom needed to provide equal and simultaneous access to the cabinets, not just to the exchanges.

Telecom's new wholesale division head, Matt Crockett, said the company would continue with its existing upgrade of broadband equipment in local exchanges, but would also be upgrading cabinet equipment.

"Because many lines are going to be coming off exchanges, equipment will still be relevant there," he said.

"It's an 'in addition' into the cabinets ... [probably] less equipment will go into the exchange because a proportion of that volume growth will go into the cabinets themselves."

Ihug chief executive Mark Rushworth said any efforts to improve broadband speeds was a good thing.

"However the cabinetisation should be focused on those longest loops, outside 3km, that would benefit New Zealand by providing them with faster speeds."

He said of the 105 exchanges telcos would look to unbundle, 78 of those would be cabinetised.

"Telecom's business case in this case would appear to be revenue retention, ie retaining wholesale revenue because they know if they do this it makes it hard for any alternative access seekers to go down the path of unbundling," said Rushworth.

TelstraClear's regulatory head Chris Abbott said the company had yet to form a view on how the move would affect future investment plans.

"Without a doubt it makes LLU more challenging because assets are stranded at the exchange."

He said the most likely alternatives for local loop unbundling were placing equipment in cabinets - sub-loop unbundling - although the economics for that were "challenging", or wholesaling cabinet access from Telecom.

"We would like to see rapidly progressing discussion with both Telecom and the Commerce Commission, who basically set the road rules, to get access to a suitable wholesale access service," Abbott said.

TelstraClear had taken a "mature and considered" approach to the opportunities under unbundling, particularly as fibre was run closer to customer premises, he said.

"There's no point harping back to historic access mechanisms."

OUT OF THE LOOP?

* Telecom yesterday released details of the areas first to benefit from running fibre to roadside cabinets - cabinetisation.

* It forms part of its plan to increase broadband speeds by reducing the length of copper line - broadband speeds reduce significantly over copper lines longer than 3km.

* Telecom's competitors are concerned the initial focus on an upgrade in urban areas makes their planned investment into local exchanges commercially unviable.

* Industry players will be briefed further on the network upgrade this afternoon.

NEW APPOINTMENTS TO DRIVE CHANGE

MATT CROCKETT
* Chief executive Telecom Wholesale.
* Born in Australia, January 1970.
* Married with three children.
* Master of Philosophy in management.
* Rhodes Scholar, Oxford University.
* Engineer at Mt Isa mines. Associate principal, global consulting firm McKinsey and Company.
* 2003-06: Head of Telecom's fixed-line network, Wired.
* 2006-07: General manager of Telecom Wholesale.

MARK RATCLIFFE
* Chief executive designate Telecom Access Network Services.
* Born in England, September 1956.
* Married with two children.
* BA (accountancy and commerce) from Huddersfield University, England.
* Worked in senior accounting, IT, project management and consulting roles in England and New Zealand.
* 1991: Joined Telecom.
* 2000: Telecom's Chief information officer.
* 2006-07: Chief operating officer technology and enterprises.
* Telecom has made the first appointments under its new structure which will see it split into three units - retail, wholesale and network divisions.

Mark Ratcliffe, who previously ran Telecom's network, IT operations and wholesale division, has become chief executive designate of the new Access Network Services business.

Ratcliffe's former role was the most affected by the split-up of Telecom's business, which will see the divisions operate at arms length with independent oversight.

He will formally become chief executive on "separation day", March 31 2008.

Ratcliffe describes the role as starting from scratch with a start-up business.

He will be responsible for the lions share of the $1.4 billion pledged by Telecom to upgrade its network. "I'm feeling really good about looking after a massive amount of New Zealand's infrastructure," said Ratcliffe.

Former Telecom wholesale general manager Matt Crockett takes over responsibility for the new wholesale division and has been promoted to the company's executive team.

The role will see him move from reporting to Ratcliffe to becoming one of his major customers.

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