Between the lines: Phone giant takes knock on chin with a grin

"When Telecom mops its brow and concedes something, it means it's in the business plan anyway," a competitor observed.

It's easy to believe that's the case in the $100 million network upgrade that will give rural customers basic internet access, promised as part of a revised Kiwi Share.

A generous concession it may be.

But it falls far short of the $250 million to $500 million Telecom told the world it would cost to bring its rural network up to that standard when the telecommunications inquiry was in full flight.

And a suspicious mind might wonder if Telecom was going to have to spend the money anyway.

On face value, it looks like a trade-off that drastically pares the recommendations of the Government's telecommunications inquiry. It wanted the Kiwi Share enshrined in legislation, with basic internet access being clarified as part of a Kiwi Share that would evolve to embrace future standards that might become the norm in residential services.

Instead, the Government has bowed to Telecom on the legislation issue by maintaining the Kiwi Share as a simple contract between itself and Telecom.

And while Telecom has accepted that modest basic data speeds of between 9.6 kbps and 14.4 kbps be included in the revised Kiwi Share, that is as far as it goes, making the $100 million upgrade to its network look a cheap price for limiting its responsibilities.

It seems even less arduous considering that the two-year spending programme will begin only once the new regulatory regime is legislated, and that will be the middle of next year at the earliest.

It could be the best part of three years before some rural users get internet access, and then at speeds a fifth as fast as those in the cities.

Telecom can claim several other victories in the telecommunications policy. For instance, the new regulatory framework will be administered from within the Commerce Commission, an organisation which in the past has been at its best in fair trading enforcement, but whose record on overseeing competition law is less than inspiring.

Another, which again centres on the Kiwi Share, is that Telecom's competitors will be required to contribute a proportional share of its rural network losses. That is not to everybody's taste.

Vodafone is said to be against it because it will be paying a competitor to provide a service that its own wireless network can provide. (Then again, there has been no suggestion from Vodafone that it would provide rural services free.)

There is also a question of how Telecom's rural losses will be assessed.

The Government has abandoned the previous disclosure regime, and has decided to overlook Telecom's failure to comply with it.

Will Telecom disclose its revenues so that competitors know they are paying their fair share only?

Nobody knows.

With luck, this will turn out to be an unduly bleak view of the Government's policy.

After all, the Alliance, which has been no admirer of Telecom, has been robust in its support.

And, after the announcement, old foes such as Clear Communications viewed the glass as half full rather than half empty.

Obviously the policy is a vast improvement on the regulatory no-man's land of the past decade, which is generally regarded as inhibiting competition.

And even with no new policy, the threat that Telecom could face something quite draconian has undoubtedly helped persuade it to make concessions on interconnection and wholesaling that seemed impossible even a year ago.

But there is a huge amount of execution risk.

The shape of the new Kiwi Share will be determined through an exchange of letters between Telecom and the Government, even though competitors with no say in the matter will be obliged to foot some of the bill from this new "contract."

And the legislation that will put the policy in place has yet to be drafted and the select committee deliberation could be more than a little interesting.

But the big test will almost certainly be in the performance of the Commerce Commission.

To date, it has not excelled.

If it fails, then the industry may well be as bitter as it ever was.