Broadband Warriors: Empire under siege

Bruce Parkes

Bruce Parkes
Telecom

Bruce Parkes has been with Telecom for 12 years. He began in marketing and was responsible for setting up the company's wholesale business. Since November 1999, when the Labour Government came to power, he's been head of government and industry relations - a team of eight.

On one side are people with economics and policy backgrounds who are involved in preparing submissions for the Telecommunications Commissioner. On the other are staff headed by Telecom's public relations expert John Goulter, whose job is to develop political relationships with the Government and with community groups, "to make sure people understand where Telecom is coming from".

A discussion with Parkes on the whys and wherefores of monopolies produces an exchange like this:

Most people see you [Telecom] as a monopoly.
Yes, well most people don't sit in our shoes and see the technology risks that we see in the market.

So you don't see yourself as a monopoly?
Not at all.

You have to agree you are a monopoly in the residential market?
At the moment, we have the only fixed network outside TelstraClear, but do we have a monopoly on broadband? Not when you look at the other players like the Wooshes and the Vodafones of the world.

So you reject the premise?
Yes, sitting in our shoes it doesn't feel like we've got a huge amount of market power. It might look like it from the outside.

It does - so is that a fault of perception?
I think it's just a maturing of the market ...

But the perception is getting worse, not better ... From my reading of what everyone is saying at the moment, you are a big, bad monopoly. You must get that all the time?
Yes, we do have that accusation levelled at us.

Parkes is an avid J.R.R. Tolkien fan and actually appears in the first Lord of the Rings movie - as "a ruffian with long greasy hair trying to look sinister" in a scene where the Hobbits arrive at the village of Bree. So it's irresistible to ask whether, in Tolkien terms, Telecom wouldn't be seen as the Dark Lord, Sauron.
No, we're more like Minas Tirith - defending ourselves against the Orcs. We're more like Gondor, Minas Tirith, the White Tower.

The White Tower? People would say you are the Orcs, wouldn't they?
I'm too big to be an Orc, I'm too tall ... (At 2m, indeed he is). That's the picture that a lot of the media paint and our competitors paint.

So we're wrong?
Yes, but I don't want that to come across as saying there is not more work to be done - we are constantly striving towards providing more for less to customers.


In Parkes' view it's Telecom, and not the consumers or competitors, which is under siege. So it's not surprising there's a similar defensive, perhaps defiant stand against criticism of the company's broadband pricing.
Our prices are not out of line with other countries. In fact they more than shape up.

There's a similar response to criticism that Telecom's progress on new technology is too slow.
From our perspective we've been investing and making available services as quickly as can be reasonably be expected given the technical and economic challenges of broadband. We don't see ourselves as behind the rest of the world.

Our poor broadband uptake (22nd out of 30 in OECD countries) can be understood according to Parkes by looking at the correlation with our Gross Domestic Product (21st out of 30 countries).
Wealthy countries have wealthy consumers that have more discretionary income that can afford to purchase broadband.

Parkes is also not impressed with the idea of operational separation of Telecom's wholesale and retail arms.
I doubt whether a highly bureaucratic approach to trying to regulate some sort of operational separation would meet with any success.

He favours instead a "wholesale charter" - with an objective of non-discrimination between retail and wholesale - which Telecom has been working on and will soon release to the industry.
We're not saying Telecom shouldn't provide access to its network. What we are saying is the best way to achieve that is not necessarily through setting up an adversarial regulatory system.

When it's suggested that it's entirely rational for Telecom to behave the way it does because it's primary purpose is to deliver shareholder value, Parkes says that's partly true, but not the whole picture. As the owner of some 40,000 shares, he says that's not what motivates him.
It's not about coming to work and saying, 'If we do this our share options will go up'. It's just not how people operate. People in Telecom are real enthusiasts for technology and what we can deliver for customers.

Parkes points out too that the company is subject to "huge numbers of constraints" on how it can behave - not just from the responsibility of having most New Zealanders as its customers, but also from the scrutiny that it gets from the media, the Telecommunications Commissioner, and also from politicians. Parkes says that Telecom - as the largest investor in telecommunications infrastructure - has a responsibility to play its part in a successful New Zealand.
We recognise that we are going to be held to account if we don't play our part. We've been told clearly by the politicians that they want us to be playing more of a part - so we are accelerating and producing more deliverables with customers. And being more upfront with what our intentions are - which I think is a good thing and something we should probably be doing more of.

He acknowledges that public pressure from media and politicians has played a significant part in the company's recent decision to introduce new broadband plans and pricing. So we [the media] do play a part in this?
Absolutely. It's an ecosystem of effects [that] drives our decisions.


It does look like the ecosystem is ganging up on you.
Yes, and we're responding.

By the numbers:

$84.90/month

The price consumers pay Telecom for a basic phone line and entry-level broadband service. Consists of an Anytime National phone rental ($44.95) plus Go broadband at 2Mbps/128kbps with 1GB download cap ($39.95). Add $12 a month for call minder, call waiting and caller display.

$63.50/month

The price competitors pay Telecom to resell a phone and broadband service. Consists of $35.63 for line rental (retail minus 5 per cent price set down by the Telecommunications Commission) and $27.87 a month for unbundled bitstream (the retail minus 16 per cent price set down by the commission).

$12-$15/month

The wholesale price, based on international benchmarks, that competitors believe is a reasonable amount to pay Telecom for unbundled access to its copper wires in the exchanges.

$55/month

The estimated price consumers would pay for a phone and broadband service if competitors had access to Telecom's copper wires. Consists of a voice-over-internet protocol phone with call minder, call waiting and caller display, plus entry-level broadband.