Kiwi Share tender option floated

By RICHARD BRADDELL

WELLINGTON - Telecom favours putting uneconomic rural Kiwi Share obligations up to competitive tender and says it might even consider selling networks in such areas if the sale created shareholder value.

The contestable tender plan was raised in Telecom's written submission to the Government's telecommunications inquiry.

But its general manager responsible for interconnection, Richard Dammery, yesterday also raised the prospect of the sale of uneconomic parts of the local loop.

He said it was more "a thought" rather than Telecom's policy and should be seen in the context of discussions about the form of telecommunications regulation. Mr Dammery added said it was Telecom's business to build shareholder value.

Rejecting the argument that significant regulatory change was required, Telecom instead argued that New Zealand's telecommunications market was working well.

"Regulation is not costless and it can, in fact, impede both innovation and the extent of competition over the medium to long-term," the submission said.

However, Telecom argued that the Kiwi Share, which provides for free local voice calling, should be retained although it should be modified so that the costs of transporting internet traffic could be recovered.

Instead of direct charging users on local internet calls, Telecom advocates that carriers charge internet service providers, which in turn can pass the charges through to customers as they see fit.

Mr Dammery said a per minute call charge on internet was unlikely, particularly as voice became integrated on to packet switched networks.

On interconnection, Telecom rejected economic cost modelling approaches as being too costly and dispute prone. Instead, it proposed two-yearly benchmarking by the Ministry of Commerce against similar countries to New Zealand.

But while the benchmarking would provide a guide, it would be up to commercial negotiations to produce interconnection agreements that would suit the needs of both parties.

However, Telecom said the industry should develop a standard form contract for interconnection with Telecom, which would then be sanctioned by the Commerce Commission.

The Government should also develop a policy statement on its industry objectives and criteria for the design of interconnection principles, which should then be developed and agreed upon in an industry forum.

The Ministry of Economic Development would be charged with developing interconnection principles should the industry fail to agree, while the commission would hold ultimately responsibility for developing a standard form contract in the event of industry deadlock.

Telecom predictably rejected unbundling of the local loop, a procedure which would enable competitors to attach their own infrastructure directly to Telecom's copper and connect to their customers without first going through a Telecom exchange.

Telecom said unbundling was technically difficult and even in the United States, where unbundling was mandated in 1996, only 0.2 per cent of lines had been unbundled in three years and had sparked extensive litigation.

While international consultants Ovum had assessed the costs of unbundling as neutral, Telecom's own re-running of the model led it to the assessment that it would cost hundreds of millions of dollars.