Aim is 'more broadband penetration'

By PETER GRIFFIN IT editor

The country's telecommunications watchdog, Douglas Webb, claims a "bow wave of broadband competition" will be created by his much-scrutinised plan to open Telecom's network to limited competition.

"I'm glad this part of the process is over," said Webb, whose plan to reject the opening up of Telecom's "local loop" network in favour of narrower regulation of broadband has won the Government's endorsement.

Webb sat down to watch Wednesday night's rowdy episode of Holmes, where Slingshot's flamboyant boss Annette Presley sank her claws into Communications Minister Paul Swain.

But he's unruffled at the indignant response from Telecom's competitors and critics who claim he bungled the report into unbundling.

"It's all too easy to take pot shots at a process when you don't like the outcome," he said.

Webb understood Swain's sentiment that the unbundling decision was a "line call".

"I can understand how you could call this one in different ways. Someone else might have made a different judgment call if they were in my seat but they weren't," he said.

After all, Webb originally recommended unbundling in his draft report, before doing a u-turn.

He put that down to the compelling cases that were made in submissions on the contentious draft.

"We changed our minds based on more and better information."

Webb said there was some misunderstanding about what he was trying to achieve with the regulation he proposed. The aim, he said, was to get broadband penetration up, something which would be driven by lower broadband pricing.

In Webb's book, services such as voice-over internet protocol and video-on-demand are premium-rate services.

"We feel people should have to invest to get there," he said.

In other words, the commission was not setting its sights too high. So would a cheaper 256Kbps [kilobits per second] internet connection with a reasonable data download allowance taken up by a quarter of New Zealand households be a desired outcome?

"That would be a big advance on where we are now," said Webb.

But that is where Webb and his critics differ in philosophy.

Telecom's rivals argue that higher speed provisions should have been imposed on Telecom in providing "bitstream access" to rivals.

Internet provider ihug labelled the provisions "pathetic".

"This 256[Kbps] service doesn't even qualify as broadband in the rest of the world," said ihug's general manager of networks, David Diprose.

Webb said the 256Kbps minimum service might rise over time but at the moment it struck a good balance.

"Those bottlenecks do tend to shift. I wouldn't rule anything out."

The problem with full unbundling, said Webb, was that the Commerce Commission saw no strong signs that it would be taken up in rural or residential areas - where competition was weak at best.

Only in "tight inner-city areas" was unbundling likely to be tried and those areas already had broadband competition.

Webb did not believe investment would be stymied by a lack of unbundling.

"It's not a heavy investment but there'll be a lot more of it than if there were unbundled loops. I'm not so concerned where companies invest."

He felt no nervousness about departing from normal OECD practice in rejecting unbundling.

"We're still regulating bitstream; a lot of other countries don't do that."

He had looked at overseas examples of unbundling regimes but found they were ineffective and underused.

"The number of loops wouldn't fill a small New Zealand town."

Webb said he did meet Australian politicians and business people pushing the unbundling mantra but did not feel pressured.

"They recognised there wasn't much use in lobbying me. They knew what my position was."

Webb would be preoccupied with figuring out the details of the "bitstream access" service, but he has several other regulatory matters on his plate.

He said the vexed issue of number portability -where phone users take their numbers with them regardless of provider - was a "burr under the saddle" for him.

"That's one that's got to happen. It's bothersome."

On Monday he would host a conference on a dispute between Telecom and TelstraClear over residential wholesale services.

He is also looking at fixed-to-mobile phone pricing.

As far as the broadband provisions to be imposed on Telecom, Webb echoed Swain's sentiments that the telco would be under intense pressure to co-operate.

"We'll be riding close herd on this."