EDITORIAL - Keeping rivals out is key to Telecom's success

Laura Franklin - Editor
Telecom's decision to increase line rental charges for 700,000 of its residential customers is yet another example of the corporate opportunism that exists when competition is lacking.
In services where Telecom faces head-on opposition from a growing range of other providers - particularly in the toll-calling and internet markets - it can be remarkably sharp in its pricing.
But having an almost total monopoly on fixed-line networks means it has its customers over a barrel when it comes to who provides their home services.
Telecom has now announced it intends to gather an extra $10 million by bumping up line rental charges for most users, from $39.85 to $42.40 _ a 5.9 percent increase.
The company blames "rising costs". However, in Wellington and Christchurch - where rival TelstraClear has its own landline cable network - Telecom has been able to keep its monthly line charge to $34.80.
That's the magic a little competition can do.
Unfortunately, such competitors are unlikely to come to the aid of consumers in other regions any time soon, firstly because a massive investment in cabling is not commercially viable for any of Telecom's rivals. (Telstra's $1.1 billion cable network rollout was never taken further than Wellington and Christchurch, and still provides the only alternative to the Telecom line system.)
The other reason we're stuck with paying whatever Telecom demands for line rental is because - almost uniquely in the developed world - our Government does not require Telecom to give other companies access to its cable network on a lease basis.
"Unbundling the local loop", as it is termed in official jargon - effectively allowing other telecommunications players a foothold to break into the monopoly - was rejected by the Government two years ago.
That has proved to be a costly move for telephone customers. Almost all countries in the OECD have adopted unbundling to increase competition in the residential market and in high-speed Internet services.
Welcome hints have been given by David Cunliffe, the new Minister of Communications, that he aims to look at improving the Telecommunications Act. He's paid lip-service to the idea of "getting tough with Telecom". Whether that will prove to be simply rhetoric is yet to be discovered.
With "calling revenues" falling and landline connections suffering slightly from the growth of cellular, Telecom will be vigorously chasing every opportunity to keep its profits soaring (witness last year's 21.5 percent jump to $916 million).
That's its job, of course. The Government's job is to ensure that the public is fairly treated, and has some choice in whose telephone services it buys.