KEY POINTS:
The Government expects its proposed three-way split of Telecom to mean cheaper, faster broadband, but is cagey about how it will respond if that does not happen.
Communications Minister David Cunliffe today released a consultation document on the separation of Telecom, and is seeking public comment on its proposal.
Telecom had earlier said it would divide its operations into two companies, retail and wholesale with the latter including its network.
But the Government is pressing ahead with a three-way split -- an access network services unit, a wholesale unit and a retail unit.
Today's release came as no surprise to the market, with Telecom shares opening on the stock exchange down just 3c at $4.80.
Mr Cunliffe said the proposal would mean better competition at the wholesale level, a clearer environment for investment by other companies, and ability for better market signals to flow through the system.
"In the long run it's going to mean cheaper, faster broadband for more people but the way to get that is through more choice," he said.
More opportunities would be available for other companies to see what aspects they could do smarter or better, and build their own products or services which they could offer to consumers either in better ways or at better prices.
That would also provide a stimulus for Telecom to hone its retail products and services, Mr Cunliffe said.
Asked how the Government's proposal would encourage investment in broadband infrastructure development he said: "Infrastructure development will be a very important issue."
A level playing field tended to mean more investment by new entrant companies in telecommunications markets, he said.
He expected to see that in a range of technologies including mobile, broadband wireless, maybe satellite, and some network levels.
The next year or two would be an important period to see how investment patterns shook down, Mr Cunliffe said.
"Of course, the Government will be monitoring very closely to see where any remaining gaps are.
"We will be talking with the market and we are making our own analyses and plans depending on how those scenarios pan out. It would be inappropriate for me to speculate on where that might go at this point."
The Government's proposal was modelled closely on the experience in Britain where British Telecom had gone through a similar process.
"In general it's a very clean split, and it's a pretty rigorous split," he said.
The network services unit was seen in the document as a physically and institutionally separate organisation, although with common ownership.
Under the Government's model existing and future copper, fibre and wireless access assets will be placed in the network unit.
Mr Cunliffe said the document suggested it would have a separate brand and separate physical location.
Asked whether Telecom would be allowed to sell the unit, he said that had not happened in Britain, but it could be argued that the incentives around the network unit were such that it could possibly operate as a separately-owned entity.
"We are working through that question to look at how it might interface with the law as currently structured. I think an expectation from external commentators might be that provided that all of the requirements of the law was met, there might be some flexibility there."
Submissions on the initial model for separation need to be with the Ministry of Economic Development by April 27.
TIMELINE: The steps to splitting
* May 3, 2006: The Government announces it will force Telecom to open its network to rivals as part of its Telecommunications Stocktake Review.
* December 13, 2006: The Government passes the Telecommunications Amendment Act with an overwhelming majority in Parliament.
* April 5, 2007: The Government releases a draft Telecom separation document for public consultation.
* April 27, 2007: Public submissions on the Government model for separation due.
* June, 2007: The Government release the final model, or determination, on how Telecom will manage its three separate businesses.
* July, 2007: Telecom has four weeks to provide a draft plan on its plans to separate the business units.
* August, 2007: Public and the telecommunications industry have a 20 day consultation period to comment on Telecom's draft separation plan.
Telecom, in consultation with the Government, have 15 days to amend its separation plan incorporating feedback and submit it to the Government.
* September, 2007: Government will accept or decline Telecom's final separation plan.
If the Government declines the plan Telecom have a further 15 days to amend the separation plan and re-submit it to the Government.
The separation comes into force once it has been accepted by the Government.
- NZPA, NZHERALD STAFF
