Paul Brislen: Telecommunication in 2013 - The good, the bad and the ugly

Opinion

The telco sector is rarely dull but this year in particular has seen a host of changes and controversy.

Let's start with the good.

The mobile sector has seen a huge boost with both Vodafone and Telecom launching 4G networks. The speeds I've seen on Vodafone's 4G network are easily four times faster than on the old network and that's changed the way I use my mobile device dramatically.

Whenever I have downtime I scan the headlines looking for news - these days I do that via video clips rather than text because they load so quickly. My emails arrive and I can whip through attached documents at the same speed I can in the office: productivity is up as a result.

Of course, there's a downside to all this and that's the data allowances. New Zealand telcos provide a paltry amount of data compared with their international cousins and so my Ferrari-speed phone has only two litres of petrol in the fuel tank, so I run out almost as soon as I hit the road. This problem has to be resolved because the benefits of mobility are so great they can't be ignored.

I expect 2Degrees to join the fray next year and then hopefully we'll see some real competition in terms of pricing and capacity.We also saw the government auction off management rights in the 700MHz spectrum band, freed up when analogue TV was decommissioned.

This will be a tremendous boost to rural broadband users because the lower the frequency, the further the signal travels, meaning 4G services in rural areas will become a reality as quickly as the operators can.

All three operators bought spectrum, but sadly two 5MHz blocks remain unsold. Rather than leaving them on the shelf, the government has decided to auction them to the highest bidder - Telecom or Vodafone - neither of which will allow the other to buy the spectrum cheaply. More spectrum means more customers or more speed, so whichever company wins will have a natural advantage.

TUANZ argued that the spectrum shouldn't be sold at this point and that both Telecom and Vodafone already have an abundance of spectrum in the desirable sub 1000MHz range. The company that needs this spectrum, but can't afford it at the moment, is 2Degrees and we'd rather see a truly competitive level playing field develop over time than have more cash in the coffers today.

That leaves the bad - and unfortunately it's Slingshot in the firing line. The small up-and-c oming challenger has been fined $250,000 for slamming. That is, moving customers from another provider to its service without their explicit consent.

This isn't the first time we've seen such activity in the telco sector, but it is rare and I hope this is the last we'll see of it. All the telcos fight for customers and sometimes overzealous sales agents bend the rules to breaking point. I'm glad to see Slingshot plead guilty to this and look forward to the end of such practices in this industry.

Finally there's the ugly - the debacle that is Chorus's attempts to shift both the blame and the risk inherent in its cost blowout to the customers.

Chorus bid for the ultra-fast broadband (UFB) contract and won 70% of the country's build. In return for a more than $900m interest free loan, Chorus has to build a fibre to the home network.

The alternative was painfully simple - if Chorus didn't win, some other company would build the network and Chorus would be left with yesterday's technology - copper. It had to win and so it pitched its bid lower than the competition.

Chorus owns the country's only national copper network and because it's a monopoly it is regulated. That these regulations cause it pain and anguish should be no surprise to anyone, least of all Chorus which was created after the rules were set down.

Unfortunately, Chorus is now throwing its toys out of the cot, demanding that wholesale regulation be wound back, that it be allowed to continue charging monopoly rents at the level it's become accustomed to.

The minister who wrote the law, Steven Joyce, is renowned as a tough negotiator and he wrote a tough piece of legislation. Chorus knew it was going to be hard work because Joyce gave them a three year delay to give the company time to come to terms with it.

Chorus's unwillingness to accept the regime it was born into is a reflection on its management and board more than anything else.

Paul Brislen is the Chief Executive of the Telecommunication Users Association of New Zealand