KEY POINTS:
Where in the world of deregulated telecoms can you sign up for phone and broadband internet services proudly provided - with a hefty subsidy - by a State-owned company? For the past week, anywhere in New Zealand. But you had to be quick: as initially marketed, the offer
of broadband with a free phone line (for 12 months) was available to just 5000 customers until 5pm today.
Orcon, an internet service provider (ISP) on Auckland's North Shore started by teen entrepreneur Seeby Woodhouse, came up with the deal to celebrate, it said, the beginning of a local loop unbundling (LLU) trial in a couple of Auckland telephone exchanges. Orcon, which claims to be the fourth biggest ISP in the country, likes to proclaim that it is 100 per cent Kiwi-owned.
Indeed it is. In fact, it's 100 per cent owned by you and me, since being bought by Kordia for $24.3 million last month. Kordia used to be known as Broadcast Communications (BCL), which was, and continues to be, the transmission arm of TVNZ. It's a State-owned enterprise.
New Zealand telecoms, therefore, have come full circle. Until 20 years ago, phone services were provided by the New Zealand Post Office. In 1987, Telecom New Zealand was formed, then sold three years later to a pair of American companies, before being floated.
We all know what's happened since. Far from being a shining example of the benefits of privatisation and a competitive market, New Zealand's telecoms services relative to the rest of the world have steadily worsened as Telecom used every legal trick in the book to thwart its rivals.
But last Thursday, an event in which Orcon and fellow ISP ihug were central players was a major step in the race to catch up. After being told by the Government 15 months ago to open its network to competitors, Telecom finally gave Orcon and ihug access to its Glenfield and Ponsonby exchanges. Local loop unbundling, the Holy Grail of telecoms competition, allows the two ISPs to install equipment and start offering services of their own creation, rather than reselling Telecom's at tiny margins. Access for more ISPs to more exchanges will follow.
Scott Bartlett, who heads Orcon now that Woodhouse has been bought out, says it's been a long wait to get into Telecom's exchanges. "We've been working towards this for five years so to finally have some equipment sitting in Telecom's rooms is a fantastic step."
Mark Rushworth, head of ihug, is also glad to have the Holy Grail in his grasp, but wants to see exchanges opened up at a much faster rate than the 15 a quarter required by the Commerce Commission.
Rushworth is also perplexed about competing with an SOE, in the form of Kordia-owned Orcon, while the Government is cracking down on Telecom. "I haven't quite got my head around it but I find it fascinating," he says.
For Bartlett, it's "really, really cool", if a little ironic, that 17 years after selling Telecom, the Government is back in the phone business and - with Orcon's offer of broadband, $20 for unlimited landline calls, and a free line rental - subsidising customers. "It shows that the Government is serious. It shows that Orcon and Kordia are serious. It means we're going to able to take some cost out of people's telecommunications spend as well as incentivise them to move to broadband."
The $79.95 offer in question had attracted about 1200 customers by Monday. Ihug's owner, Vodafone, coincidentally, came out with a deal at the start of the week of $41 for a phone line, $20 for unlimited landline calls, and 12 months' free broadband.
Price cuts are attractive in themselves but the services the LLU trial ushers in are even more mouth-watering. Orcon and ihug's initial broadband offering, ADSL2+, will be three times the speed of Telecom's service, and a 10-times faster service (VDSL) is also being tested. And whereas Telecom can't even provide caller ID in Ponsonby, phone services from the two newcomers will have that and dozens of other features.
Orcon will be hooking up customers on a trial basis from next month but ihug doesn't expect to launch services until the end of the year.
Like all good stories, this one has multiple ironies. Ihug could well end up both competing with Orcon for customers in Ponsonby and paying its parent, Kordia, to connect those customers to the rest of the world. "If that compares with other options, of course we'll consider it," Rushworth says.
Welcome, local loop unbundling, and welcome back, State-owned telecoms.
* Anthony Doesburg is an Auckland-based technology journalist
