Chris Barton on technology

Chris Barton is a Herald Online columnist

Chris Barton: Writing on the wall for telco commissioner

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Telecommunications Commissioner Ross Patterson pictured in 2007. Photo / Mark Mitchell
Telecommunications Commissioner Ross Patterson pictured in 2007. Photo / Mark Mitchell

Telecommunications Commissioner Ross Patterson did himself no favours when he released his long awaited high speed broadband services demand side study last month.

Mostly the report is quite tame, kicking for touch on the contentious issues of net neutrality and Sky's monopoly control of video content, and saying that "competitive pressures" will sort out the choking effect of our draconian data cap regime. In other words the market will sort it all out. You'd think that would be music to this government's laissez faire ears.

But Patterson, ever the good civil servant, also highlighted something seriously damaging to the government - that Chorus has been given preferential treatment over the other local fibre companies in its contract to deliver ultra fast broadband.

What Patterson showed - expertly explained by Inside Telecommunications - is that Chorus isn't required to wire-up New Zealand homes to the government's $1.5 billion information superhighway in the same way as the other providers. In fact it's only required to supply half as much fibre cable as Enable, Northpower and UltraFast Fibre.

As Patterson rightly points out this could slow the uptake of ultra fast broadband because any households which are more than 15m from the road, or require more than 5m internal cabling, or need a double aerial span (two telephone poles) to reach their house, are going to be hit with significant extra costs.

It's beyond Patterson's remit to question why this unequal set of contracts has come about, but there it is for all to see - a government sanctioned uneven playing field in favour of Chorus and disadvantaging consumers.

Deals like this make a mockery of creating an open competitive market in telecommunications in New Zealand, exemplifying the lack of transparency in the process whereby Crown Fibre Holdings allocated these fibre contracts. The company is yet to answer why Chorus was given a better deal than anyone else. Such favouritism - already apparent in the financial structure of the deal - smacks of political interference. It makes one wonder also - given Crown Fibre Holdings is stacked with ex-Telecom staff - whether the deal was a foregone conclusion and whether competitor bids for the fibre rollout in most of the country ever stood a chance.

Over a couple of decades of watching our telecommunications market the one constant is doublespeak - encouraging words about level playing fields and open competition and yet a reality that always reverts to ensuring monopoly control.

Business commentator Brian Gaynor demonstrated the disconnect between free market rhetoric and reality in a column last month when he said: "This begs the question whether the uncertain regulatory environment does more harm than good, particularly for individuals who benefit from any telecommunications price decrease but also have an investment in Chorus through their KiwiSaver fund."

Gaynor was lamenting the fall in Chorus's share price following the Patterson's recent draft ruling lowering prices for access to Chorus's unbundled copper network. He blamed lack of regulatory certainty and too much focus on consumer needs with scant regard to Chorus's shareholders or investors.

To which it's worth replying that the central plank of our Telecommunications Act is to provide for the "long-term benefit of end users of telecommunications services within New Zealand." The re-pricing of Chorus's unbundled network had also long been signalled and clearly foretold in the legislative process. Because Chorus had reduced the average length of its copper loops through its cabinetisation programme, the lower price was an obvious outcome. Shorter loops equal lower prices - something the market was, or should have been, well aware of.

In other words Patterson was simply doing his job as he's required to do under legislation that's been in place for more than a decade. What's worrying about such commentary is the weight it adds to calls for Patterson not to get a second term as commissioner. The underlying claim is that our regulation is too tough on the newly formed Chorus monopoly and we need to go back to the bad old days of light-handed regulation. Give us a break. Since when has the telecommunications consumer ever had a fair deal in New Zealand?

But this government seems determined to get rid of Patterson - taking the unprecedented step of advertising his position, even though he has expressed interest, largely at the encouragement of the industry, in staying on for another term.

While many - me included - feel Patterson could do more for the long-term benefit of end users, it's probably fair to say he's doing the best he can with the crappy legislation he has.

It's worth remembering also that he has had some significant consumer wins. Like the $31.6 million compensation Telecom had to pay its rivals over discriminatory pricing. And the $1.6 million paid in compensation by Telecom when its wholesale "loyalty offers" were found to be anti-competitive.

It's difficult to fathom why the government would want to get rid of Paterson, other than to usher in another period of less telecommunication regulation. But it's possible he may be paying the price for nine months medical leave which he began in 2008 when he voluntarily stood-down to seek treatment for what the commission described as "an alcohol-related medical condition". At the time commentators such as Cactus Kate interpreted the statement as meaning Patterson was an alcoholic.

The point of view has been difficult to shake. When Patterson returned to work in 2009 NBR headlined its story, "Telco commissioner beats bottle but political demons remain".

Last month Whaleoil revived on the concern: "The government's fibre policy is too important to be put at risk by someone who has other distractions, demons even.

The problem with such character assassinations is that they don't tell the full story. If anyone had asked, Patterson would have told them his problem related to finding out he had Hashimoto's disease - a thyroid condition which among other things limits the body's ability to metabolise alcohol.

But there's no doubt Patterson has seen the writing on the wall. As he told Media Watch on Sunday, he's already looking for positions overseas. Losing someone of Patterson's ability and experience would be a severe blow to telecommunications consumers in New Zealand, and once again signal government policy that shareholders' rights rule.

- NZ Herald

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