KEY POINTS:
Phone companies are urging the Government to stick to its plan to split up Telecom and ignore the telco's threats to cut investment.
CallPlus' general manager of wholesale, Graham Walmsley, said Telecom's cries for a better return on infrastructure investment were the "same old, same old" heard whenever
the industry reached a crossroads.
The Government has called for feedback on Telecom's proposed plan for a two-way split, which would see Telecom's retail and wholesale units operating separately and the network assets held in a separate company.
Telecom's proposal is in response to the Government's plan to separate the company into three operating units - retail, wholesale and network - to give competitors equal access to its network and services.
Walmsley said the threat to cut investment was the same Telecom used in 2004 when it was being forced to offer competitors access to its high-speed internet service.
At the time, chief executive Theresa Gattung secretly wrote to then Minister of Communications Paul Swain and said it "would never be able to make the economics work for this form of NGN [next generation network]".
"In 2004 the Government bought the story on the basis that we were going to get world-class broadband and investment in NGN," said Walmsley.
"Three years later Telecom are telling us that there's been an under-investment, there'll be a shortfall and we're still in the bottom third in the OECD. So clearly what we've done in the past hasn't worked."
At Telecom's third-quarter results briefing this month, chairman Wayne Boyd said any further investment in broadband would depend on being able to earn a fair rate of return.
Telecom has stated there is a $1 billion investment gap in what is needed to deliver the Government's digital strategy.
InternetNZ director Jordan Carter has rubbished claims there is an issue with the rate of return on investment in the Government model.
"The pricing of regulated services under the Telecommunications Act are already calculated with investment incentives in mind to ensure a long-run future for these services."
Carter said Telecom was free to move to structural separation further down the track and urged the Government to continue with operational separation. "The Telecom proposal asks for a complete rewrite of a regulatory framework that is only six months old."
He said the law changes required could add at least a year to the process.
Telecommunications Users Association spokesman Chris O'Connell said the "negotiate by submission" route that Telecom was taking was high-risk, but showed "how high the stakes in this game are".
"It's easy to see that we're now on a path that could lead to more confrontation again."