Telecom will not have to unbundle local loop - Swain

1.15pm

Communications Minister Paul Swain said today he would not force Telecom to unbundle its local loop phone network.

Instead, he accepted Telecommunications Commissioner Douglas Webb's recommendation that Telecom offer wholesale high speed internet (broadband) services to rivals on the local loop to foster competition.

He also accepted an offer by Telecom to allow competition on some circuits primarily used for business data within six months.

Mr Swain said the Government wanted greater broadband uptake by New Zealanders as rapidly as possible and in a more competitive environment.

"In my view, the decision I have reached presents the best opportunities to achieve that".

Telecom's competitors, particularly TelstraClear, and telecommunications groups have in recent months lobbied Mr Swain to disregard Mr Webb's final recommendation and implement full local loop unbundling.

However, Mr Swain said today he could only regulate a service following a recommendation from Mr Webb, therefore full local loop unbundling was not an option.

Mr Swain said he had been faced with a decision between accepting Mr Webb's recommendations in full, rejecting them or sending them back to him for further consideration.

But if he had sent them back for review, "...there was likely to be considerable delays to broadband competition, frustrating this government's goal of encouraging growth and innovation".

"I recognise that my announcement today may not please everyone. However, on balance, I think this is the decision that has the potential to quickly promote more competition in the long term interests of consumers," Mr Swain said.

The success of today's move in encouraging broadband competition depends on Telecom offering "bitstream" wholesale broadband services to competitors at a viable discount to its retail rates.

Telecom currently holds about 80 per cent market share of broadband services in New Zealand.

Mr Swain said he understood Telecom intended to exceed Mr Webb's recommendations for bitstream unbundling.

"The extent to which this is achieved will influence any future decision I may make on whether to refer these issues back to the commissioner," he said.

"The message to Telecom is that there is a chance to show good faith and truly pave the way for more competition."

Investors clearly saw the decision as a boost for Telecom, sending its shares 8c higher to 565 shortly after the announcement.

The company said it was "well advanced in its planning to deliver the unbundled services which the Government has endorsed".

"We have been prudently working on getting ready to deliver these services to our competitors, and will have them available in June and September respectively," general manager of government and industry relations Bruce Parkes said in a statement.

"We are totally committed to making the recommendations work."

He said Telecom had set a target of 250,000 residential broadband customers by the end of next year.

"We see about a third of the 2005 target being delivered by competitors through a combination of unbundled and wholesale services."

Mr Parkes said the there had been a long and intensive debate over unbundling.

"Now that we at last have some certainty, we can get on with the job and focus on delivering for customers".

- NZPA