Consumers Institute says unbundling call bad news for consumers

1.00pm

Consumers will miss out on cheaper, better telecommunications services because of the Government's decision not to give Telecom's competitors access to subscribers' landlines, so called "local loop unbundling", the Consumers Institute says.

Communications Minister Paul Swain said yesterday he had, on the recommendation of Telecommunications Commissioner Douglas Webb, accepted an offer from Telecom to supply wholesale high speed internet (broadband) services to competitors.

But Consumers Institute chief executive David Russell said this morning the decision was a poor one for consumers.

"We believe they've made the wrong call, we believe that New Zealand consumers right now could get a better deal if unbundling of the local loop took place," Mr Russell told National Radio.

But Mr Swain, while conceding there was no question consumers would have benefited from local loop unbundling (LLU), said: "the bigger benefit was doing the unbundling of broadband".

Mr Swain told National Radio Mr Webb's recommendation on the matter had forced his hand.

"If I were wanting to unbundle the local loop now, after him doing all that work, then the only thing for me to do is go back and change the Telecommunications Act which I'm not prepared to do."

Mr Swain said Mr Webb had identified the expense of attaching competitors' technology to the local loop as being reason not to adopt LLU.

"Telstra will tell you that it is an expensive thing to do in Australia and in fact even though they have unbundling there is a low number of take ups".

However, telecommunication analysts have pointed out that in Australia the prospect of having competitors directly attaching their equipment to Telstra's local loop had motivated the company to offer much more competitive wholesale broadband rates to prevent this.

Under the scenario adopted by Mr Swain the pressure on Telecom to keep wholesale charges lower will be less.

Telecom's offer has also attracted criticism, particularly from major competitor TelstraClear for the relatively low speed of the service offered and for the fact that details of pricing have yet to be revealed.

The speed of services Telecom is offering to competitors is at the very lowest level of international definitions of broadband, something Mr Webb acknowledged in a preliminary report.

The success of the regime accepted by Mr Swain depends on Telecom working with competitors to set wholesale prices at a level which promotes competition.

"Both the commissioner and I have said that Telecom now is on notice, we expect greater roll out and competition in broadband services over the next few months", Mr Swain said.

However, TelstraClear chief executive Rosemary Howard yesterday was sceptical Telecom would play fair.

"Can I see any reason why suddenly they think they should work in good faith with other players? No.

"I believe their strategy blatantly is to hang on to their monopoly at all costs and preferably to kill the enemy... I can't see any hope of better behaviour from Telecom," Mrs Howard told NZPA.

Meanwhile, Mr Russell said Mr Swain's decision which appears to favour Telecom was the result of the company's commercial acumen.

"They are very, very competent commercial operators, they know exactly which buttons to push.

"They are excellent at the use of their commercial power.

"Their prime purpose in life is not necessarily to provide the consumer with the best deal, but to provide the shareholders with the best return on investment."

Telecom shareholders appeared to regard Mr Swain's decision as a big plus for the company, sending its stock 9c higher to $5.66 yesterday.


- NZPA