About-face sees regulator rule against local loop unbundling

12.48pm

In an about-face on its earlier draft determination, the Commerce Commission today said Telecom should not be forced to open its "local loop" or copper wire network to competitors.

"The Commission does not recommend the specification or designation of unbundling of local loops," the Commission said in its report on the issue to Communications Minister Paul Swain, released today.

"The Commission is no longer recommending unbundling of the local loop, because of what we have learnt about the costs and difficulties of that solution in comparison with the potential benefits," said Telecommunications Commissioner Douglas Webb.

"Instead, the Commission considers that a direct focus on high-speed internet access produces higher benefits for consumers, through lower prices and innovation, and will also act as a spur to further improvements in Telecom's efficiency," said Mr Webb.

The Commission has recommended that regulation be introduced to improve competition for broadband internet services in the residential and small and medium-sized business markets.

The Commission found there is insufficient competition in those markets for broadband, and is recommending that Telecom be required to provide new entrants with a wholesale DSL service to allow entrants to develop and offer to consumers their own range of broadband products.

The Commission therefore has recommended:

* unbundling of, and interconnection with, Telecom's fixed Public Data Network in the form of access to an asymmetric Digital Subscriber Line (DSL) bitstream access service, with the initial pricing and final pricing principles based on a retail minus methodology; and

* access to a backhaul transmission service used in conjunction with an asymmetric DSL bitstream service. The Commission recommends that the initial pricing principle should be based on benchmarking and the final pricing principle should be based on cost-based pricing (TSLRIC methodology).

Mr Webb said the Commission is not recommending the unbundling of other elements of Telecom's fixed Public Data Network beyond those supporting the asymmetric DSL bitstream service.

"The decision not to recommend unbundling of other elements has been influenced by Telecom's recent announcement of an Unbundled Partial Private Circuits services offer that has the potential to provide a commercial solution to a competition problem in the supply of high grade data services to corporates and other large users.

"The Commission would have favoured further unbundling had Telecom not offered a market-led solution. We think the Telecom proposal has potential to meet the needs of the industry and major business users. The Commission intends to monitor these developments. Should a suitable outcome fail to eventuate within the next six months, the Commission considers the case for regulated unbundling in that market should be revisited."

Commerce Commission report:

Local Loop and Fixed Public Data Network Unbundling