Don't ease up on Telecom, say rivals

Telecommunications Minister Steven Joyce. Photo / Sarah Ivey

Rival broadband companies have warned the Government against easing Telecom's obligations to separate its businesses.

Labour imposed the separation in 2008 after a crisis in relations and the company's share price has tumbled - partly due to the new regulated environment. But competitors are urging National against meeting requests to pull back from regulations.

Vodafone and Vector are both opposing a Telecom request that - if backed by the Government - would roll back some of the undertakings imposed on the struggling telco.

Industry organisation internet NZ said the Government would be throwing away bargaining chips if Telecom volunteered fuller separation in the future.

But the Telecommunications Users Association of New Zealand says there is a case for easing some of the separation deadlines, "cutting some slack" for the telco during tough times.

Telecommunications Minister Steven Joyce invited submissions that closed last week.

Telecom asked to step back from obligations as part of its move to separate its retail and wholesale arms to allow competition from wholesale clients.

The Government plans to pump $1.5 billion into ultra-fast broadband (UFB).

But restrictions against companies with a retail arm effectively shut Telecom - under its current structure - out of the project.

Telecom spokesman Ian Bonnar said: "Undertakings were developed in 2008, with a different government in power, and before the Ultra Fast Broadband fibre policy was even envisioned.

"UFB will fundamentally change the entire industry landscape and refocus it on fibre, rather than copper. Our variation asks for us to be able to stop spending money on undertakings that were designed for a copper world, not a fibre one, and ... may be obsolete."

Telecom could do with some good news. After the fiasco with the XT mobile network and the retail wholesale rule limiting its prospects, Telecom's share price has been wallowing at below $2. Shares closed yesterday at $1.97.

Critics say there may be a case for change if there is full separation but this is not the time to ease the rules for Telecom. The variation to the rules would effectively end the benefits from operational separation that had already occurred, said internet New Zealand policy director Jordan Carter.

He said operational separation had driven new investment by a range of players, seeing lower prices and higher speeds for customers.

"Regardless of whether Telecom is a player in the UFB world, the copper access network is going to be a mainstay of telecommunications services for years to come," Carter said.

"Allowing this request now would prejudice the Government's ability to get the best deal from any Telecom participation in UFB and weaken the Crown's negotiating position in any structural separation discussions down the line," he said.

Telecom's fibre-to-the-node programme is not impacted by the variation requests.

Vodafone said in submissions it did not accept that the UFB initiative was a valid justification for requesting further delays in implementation of the undertakings.

"Vodafone recognises that the undertakings have driven significant cost into Telecom's business, but they had consequences for the rest of the industry. While Telecom may not have been aware of the exact requirements of the current UFB programme, it was aware that something like UFB was coming, in some form or another, when it signed up to the undertakings."

Vector's submissions were not available, but are understood to be highly critical of the Telecom request.

GIVE US A BREAK

Telecom has requested changes to its separation requirements. It wants to:

* Suspend the forced bulk migration of existing broadband customers on to a new copper-based broadband service. Telecom would continue to supply this new broadband service to all new customers.

* Remove the requirement to migrate 17,000 customers on to a new Voice Over internet Protocol over copper service by the end of this year.

* Remove the requirement to build a new set of wholesale systems that are not consistent with the industry structure implied by ultra-fast broadband.