Prime Minister Helen Clark yesterday promised action to boost high-speed internet use in the strongest signal yet that regulation against Telecom is coming.
"The slow speed of broadband we're being offered, the high cost of it - the case is starting to be made by a wide range of commentators," she told Newstalk ZB's Paul Holmes when asked about Telecom's slow broadband rollout.
"It is a compelling case and there will be further action. I cannot say to you what it is, but there will."
Clark was not commenting further yesterday, but a spokeswoman said improving the slow adoption of broadband internet was one of Clark's priorities.
"She has talked about it several times over the past few months," the spokeswoman said. "What she was saying is that 'yes, it's an issue that needs to be addressed'."
Clark's statements come as the Government conducts a review into the issue and is expected to make a decision on regulation by the middle of the year.
Pressure is mounting on the Government to regulate Telecom. A chorus of business leaders, economists, competitors, media and users are calling on the Government to break up the company's monopoly over the internet by allowing rivals access to its network in a process known as local loop unbundling.
In 2003 Telecom persuaded the Government to shelve unbundling in favour of its proposed unbundled bitstream wholesale scheme.
But the company last week announced it had missed a key customer target under that scheme. The Government was expecting the company to have 250,000 residential customers by the end of 2005, with a third coming through wholesale. Telecom surpassed the first goal, with 279,000, but fell short of the second with only 22 per cent coming through wholesale.
New Zealand ranks near the bottom of broadband uptake in the OECD, at 22nd out of 30 countries, and evidence is emerging that the lag may be hurting the economy on a whole.
Telecom had no response to Clark's comments.
John Small, now a consulting economist at Covec, was economics chair of Auckland University at the time of the unbundling decision in 2003. He was asked to consult on the decision and recommended going ahead with it. Avoiding it, he said, was a lost opportunity.
"The alternative method was supposed to be a faster route to faster broadband. I don't know what the slow route would have looked like but this one doesn't look very good to me."
Communications Minister David Cunliffe said last week that he was reviewing regulation and would have an announcement by the middle of the year.
He reiterated yesterday that a range of options, including unbundling, were being considered.
Cunliffe also said that Clark was well aware of the broadband problem.
"The PM is reflecting a general feeling of concern that New Zealand is lagging some of our competitor countries and that we haven't seen a more rapid improvement in broadband performance than we have," he said.
"In a sense, however, there's nothing new about the PM's comments.
"It's already in the public domain that we have a stock-take process under way."
Cunliffe, who was promoted to the Cabinet after the election, said it was premature to gauge the other ministers' attitudes toward Telecom as he had to brief them on his review.
Broadband in New Zealand
* New Zealand ranks 22nd out of 30 OECD countries in broadband adoption.
* About 10 per cent of households have high-speed internet, half the OECD average.
* Full-speed business broadband is the second-most expensive in the OECD, with average monthly rental running about US$600 ($880), compared with leader Japan at about US$35.