Between the lines: Big stick call by telecoms inquiry

By RICHARD BRADDELL

It was rumoured, now it is a fact ... the telecommunications inquiry means business.

The report released yesterday argues forcefully for light-handed industry self-regulation, but offers a mighty big stick.

That Bruce Parkes, Telecom's general manager of government and regulatory relations, is worried by the inquiry's call for a regulator is less than a surprise.

In fact, much of the structure smacks of the highly interventionist Australian approach in which the regulator can "declare" services, such as local loop unbundling.

Aside from the risk of regulatory creep, as Mr Parkes cautioned yesterday, that is an approach that provides a solid incentive for players to argue with the regulator too early on, instead of seeking the "win-wins" of industry-negotiated solutions.

Of course, the other side of that argument is the one we have lived with for the past decade - if an industry player does not want something, negotiations can become very tortuous indeed.

But as Mr Parkes observed, the inquiry has taken a very different tack from that in the electricity inquiry. For a start, the telecommunications report is much easier to grasp. And while the electricity inquiry put its faith in the Commerce Commission - revamped, of course - Hugh Fletcher's document makes no bones that it is not equal to the task.

The telecommunications inquiry leaves the ultimate sanction with a new regulator, and removes industry governance far more effectively from the political environment.

The inquiry's endorsement of a regulator can be regarded as a victory for Clear Communications, and a defeat for the strongest opponents, Telecom and Vodafone.

Not everything has gone Clear's way. Clear wanted Telecom's local loop unbundled so it could attach its own facilities directly to Telecom's network without having them filtered through a Telecom exchange.

That is the approach increasingly favoured in Europe, Australia and the United States, which results in an explosion in the number of broadband service providers using rapidly evolving xDSL fast internet technologies.

Instead, the inquiry has gone for the halfway house of insisting that Telecom wholesale its services to other carriers, something it belatedly is doing anyway, but not before a bitter round of court action with Telstra.

In so doing, it is treading a delicate balance, not least because unbundling could well discourage the rollout of Telstra Saturn's network.

Another surprise, given the report's hawkishness, is that it has not "designated" number portability. While Clear mounts a credible argument that the industry grouping set up to investigate number portability is far too slow, the inquiry suggests it is a good model for industry self-regulation.

But it also warns that a regulator could revise that view. You can talk quietly when you carry a big stick.