Saturday, March 25, 2006

Christopher Niesche: Government action needed

Telecom's announcement this week that it plans to offer a super-fast internet service by Christmas has been greeted with a predictable response.

The company only introduced the new service to convince the Government that it's doing a good job providing broadband to New Zealand, Telecom's competitors say. The argument goes that introducing faster broadband now is nothing more than a ploy to ensure the Government doesn't force Telecom to open up its lucrative phone network to competitors - the much talked-about local loop unbundling.

The critics are right, but why this surprises and outrages anybody is a mystery.

Telecom seems to be suffering a hangover in the public mind from the days when it was owned by the Post Office and existed for the national good.

But it's been a listed company for 15 years and has shareholders who want it to maximise profits. If the Government wants to do something that will reduce those profits, then Telecom's duty to shareholders is to try to stop it.

When, for instance, Sky TV introduces a new programme or service, people don't accuse the company of cynically trying to attract more viewers to increase profits.

The difference, of course, is that Telecom is in charge of some important national infrastructure assets. (Though some might argue that by delivering Super 14 games to New Zealanders' living rooms, Sky TV is also in charge of important national infrastructure.)

Telecom's new service - known as ADSL2+ - is the next generation of broadband. It will provide internet download speeds of 24 megabits-a-second, around 12 times faster than anything it offers at the moment.

While the service will be a huge improvement on what's available, there are some caveats.

Telecom hasn't yet disclosed what it will charge for the service. Nor has it said what the data caps will be.

There's also the question of what price Telecom will charge its competitors for access to the new service.

Broadband is an enabler of economic growth, a fact the Government finally caught on to this year.

A study by the Economist Intelligence Unit and IDC New Zealand, released earlier this month, found that a rapid uptake of broadband over the next 25 years would add $13 billion to the country's gross domestic product.

Unfortunately, New Zealand lags much the rest of the developed world in broadband uptake and the services on offer; something the Government wants to remedy.

The new service will improve the performance somewhat, but won't lead to the sort of competition among internet service providers that would see any dramatic improvement.

The Government is conducting a review of how to improve the country's broadband performance and, in response, Telecom will do everything it can to retain control of its phone lines.

In fact, the company spends so much time and money briefing competition lawyers that there's a joke that it's more like a law firm that happens to have a copper wire telephone network attached than an actual telecommunications company.

Telecom's determination to fight tougher regulation shows up in the composition of its eight-member board: Three lawyers, but only one director - Michael Tyler - has any significant technical expertise in telecommunications.

The Government will need to force Telecom to offer better deals to its competitors or to open up its network to competition.

The impetus for better internet service won't come from Telecom and no one should expect it to.

Telecom has too much to lose. It has to come from the Government.


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