Swain's advice snubbed

By PAUL BRISLEN

The Government's decision to let Telecom keep its monopoly on the local loop was against the advice of Communications Minister Paul Swain and the Economic Development Ministry.

Official papers just released show Swain believed the Commerce Commission should revisit its December recommendation against opening Telecom's local loop to competition.

The local loop is the collection of wires connecting local exchanges to homes and businesses. Instead of unbundling, the commission recommended a form of wholesaling called "bitstream" access for one of Telecom's entry-level high-speed internet services - a suggestion later accepted by the Government.

Swain asked for advice from the Ministry of Economic Development on the recommendation.

The papers show the ministry called for the commission to reassess its position on full competition in the local loop by October, and for Telecom to increase the number of high-speed services it offered to rivals.

Swain appears to have taken the ministry's advice.

On May 12, he recommended to the Cabinet that he should ask the commission to reassess its conclusions.

However, a further briefing paper delivered by Swain just one week later suggests this did not sit well with his colleagues.

"Ministers raised a concern that my initial view to request the commission to conduct a reconsideration of bitstream unbundling and full [unbundling] could result in delays to the consumer in receiving the benefits."

On May 19 he suggested the Government had two options: ask the commission to revisit the issue or accept the commission's recommendations and issue a public statement outlining the Government's "expectations" on future pricing and service delivery by Telecom.

The same day, the latter option was exactly what Swain announced, saying the Government and the commission would look closely at Telecom's broadband plans and would revisit the question of wholesale and unbundling should the need arise.

Telecom is introducing a bitstream wholesale service that goes beyond the recommendations of the Commerce Commission, and it promises to add another product to its bitstream service early next year.

The issue

* Telecom has a monopoly on the "local loop" - the copper wire between telephone exchanges and homes or businesses.

* The Commerce Commission was studying whether to force Telecom to open the local loop to competitors, a process known as "unbundling".

* Full unbundling would allow competitors to provide new calling and internet services, with less reliance on Telecom.

* Unbundling has taken place in every other OECD country bar Mexico.

* The commission's report in December recommended that Telecom should retain its local loop monopoly, but demanded concessions on high-speed internet access.

* Last month, the Government endorsed the commission's decision.