Friday, May 05, 2006

Brian Fallow: Next target should be power market

A first world economy needs first world telecommunications, especially if it is tucked away in the bottom right-hand corner of the world.

The Government has at last acted on that rather self-evident proposition by unbundling Telecom's local loop and decoupling access to its broadband network from the requirement to buy phone services from it as well.

The move comes 6 years after Labour was returned to power, but better late than never.

And it's a welcome departure from the prevailing Government view in the 1990s, which seemed to be that while Telecom was a quasi-monopolistic so-and-so, it was our quasi-monopolistic so-and-so, a Kiwi David battling foreign Goliaths like Telstra and Vodafone. Deregulation was always good and regulation was always bad, and if we were out of step internationally it was because we were smarter than everybody else in devising regulatory regimes.

The cost of these delusions is to be seen in low rates of broadband uptake, reflecting high charges and low speed.

The sound of impatient prime ministerial fingers drumming over this matter has been audible for some time, but the share price reaction yesterday suggests the changes are heavier-handed than the market had expected.

The Business Roundtable describes unbundling as infrastructure socialism - what's yours is mine by Government decree rather than on commercial terms. Yet somehow capitalism survives in all the other developed countries which have gone down this route.

The regulation of market power is a precondition of effective competition. Other internet service providers will have to pay Telecom rent for the use of its network; it's just that a regulator, not the incumbent, gets to set the price.

The argument that competitors are free to roll out their own networks - as the late lamented Saturn did in parts of Wellington and Christchurch - misses the point. The same could be said of local electricity lines networks, which are regulated as a matter of course.

The broadband issue has now been addressed, and funding for roading has been dialled up, we are told, as high as the physical capacity of the construction industry can handle.

But electricity, an even more alarming area of infrastructure deficit, has barely rated a mention in the infrastructure passages of Michael Cullen's speeches lately.

Will the Government now turn its attention to the uncertainties besetting that sector which have reached toxic, investment-blocking levels?

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