OECD says unbundling is important 'first step'

The breaking open of Telecom's monopoly of its phone lines is a wonderful opportunity for both New Zealand and Telecom, says an OECD official.

"It's impressive. It's pretty big ... It's an important first step," said Taylor Reynolds, a Paris-based telecommunications statistician for the Science, Technology and Industry Directorate of the Organisation for Economic Co-operation and Development.

Reynolds is in Wellington to give the keynote speech at the Telecommunications Users Association annual conference today. Following the Government's announcement three weeks ago of sweeping changes to telecommunications regulation, he said, the speech would be much more positive than originally planned.

"It's not so much a beat-up on New Zealand - it's more about here's where you stand and here are the opportunities now with local loop unbundling."

New Zealand decided against unbundling in 2004, becoming one of the few OECD countries to do so. The country is consequently well behind the rest of the OECD in uptake of broadband, sitting at 22nd out of 30. The Government has identified broadband as a significant source of economic growth and transformation, and boosting that uptake is a key priority.

Reynolds said unbundling has been very successful across the OECD regarding broadband speeds, prices and competition, and has ultimately led to improved uptake.

"This is an exciting time for New Zealand because you've essentially got 26 other countries that have unbundled in the OECD.

"You've got 26 other examples to look at and say OK, this worked and this didn't work, we need to watch out for this. You've got a very good roadmap."

Other countries' trials and tribulations have shown that setting tough enforcement rules is just as important as the actual unbundling, he said.

For example, in some countries telephone incumbents have voluntarily incurred fines for violating unbundling regulations because they were preferable to losing revenue to competitors.

On the other hand, incumbents who have embraced unbundling - such as BT in the UK, which voluntarily split its business into network and retail units - have reaped the rewards, he said.

BT last week reported upbeat results, posting its first rise in quarterly earnings in three years and a 1 per cent improvement in earnings before interest, tax, depreciation and amortisation, or ebitda.

Analysts attributed the improvement to the company's change of attitude.

"These are very challenging times in the fixed-line business, and most incumbents are reporting a fall in revenues in this sector. BT is the exception," an Ovum analyst told Reuters.

Citigroup analysts told Investors.com: "The transformation of BT's business has been clearly demonstrated in the fourth quarter. The company is set to continue delivering superior financial performance in a European sector context, in our view."

Reynolds said BT's attitude was a win-win situation for the company and its competitors as the overall UK broadband market was growing.

"BT wasn't always like that, but now that they've embraced that as the model, they've been very successful."


WHERE NZ STANDS

* The Tuanz telecommunications conference today in Wellington will see a who's who of the industry give speeches, including Theresa Gattung, David Cunliffe and Douglas Webb.

* The OECD representative says unbundling is a big opportunity for both New Zealand and Telecom.

* As of December, the OECD had 158 million broadband subscribers, or 13.6 per 100 inhabitants. New Zealand has 8.1 subscribers per 100.