Telstra shifts ground on access to local loops

By Richard Braddell

Between the lines


Sharpen a wooden stake. Telstra's Lindsay Yelland wants New Zealand's lawmakers and regulators to force Telecom to unbundle its local loop to allow direct access by competitors. Telstra is no longer the company happy to do business no matter the regulatory constraints.

Now it is unambiguously lined up with Clear Communications, the other major new entrant tackling the business market, which also suffers from having to rely on Telecom's local loop for the "last mile" connection to its customers.

It's enough to send a shudder through right-minded telephone companies -- a diminishing breed admittedly -- like Telecom, Saturn, and Vodafone, whose disdain for heavy-handed intervention is driven by the fact they don't have to rely on another for connection to their customers.

But while the ideas of Mr Yelland, who is responsible for New Zealand at Telstra's Sydney headquarters, seem jarringly visionary to a New Zealand audience, the idea of opening the incumbent's network for use by competitors is old hat in the United States, and is catching on in Britain as well as Australia, where Telstra, from last month, is legall

y required to let competitors attach their own equipment to its lines.

Not, of course, that Mr Yelland concedes that Telstra's forthrightness has anything to do with the fact Australia's regulators have left it no option but to behave well towards its competitors. We must take his word that it always has. But Mr Yelland raises an interesting point when he suggests that maintaining the local loop as a Telecom monopoly will result in inefficient duplication that will be paid for by consumers.

The contrary view is that alternative infrastructure will be more modern, thus reducing the incentive for incumbents to skimp on maintaining their local networks.

In contrast to many regulatory regimes, New Zealand's offers no guidance as to whether it sees the market better served by competing infrastructures or by making the most of the sunk costs already poured into Telecom's. The Australian approach didn't either. But competitive pig-headedness resulted in Telstra and Optus losing heaps duplicating cable networks.

In Britain, the encouragement given to cable television companies to enter telephony did two things: produce losses for many years for the new entrants and provide a long list of mistakes to avoid when Saturn Communications entered the Wellington residential market.

Given the British enthusiasm for alternative infrastructure, it is ironic its regulators are now leaning towards forcing British Telecom to unbundle its local loop.