Thursday, May 04, 2006

Peter Nowak: At last, a bold plan for better broadband and cheaper calls

After years of ineffectively regulating telecommunications and allowing itself to be hoodwinked by Telecom, the Government has finally got it right. For consumers, its plan to break the company's monopoly is monumental, bold and far-reaching, and it should do much to erase New Zealand's international reputation as the developed world's backward country cousin.

The Government blundered in 2004 when it decided against allowing Telecom's competitors access to its network, and the country has suffered from high prices and slow broadband ever since.

Yesterday's decision rectifies that error. Not only will competitors such as TelstraClear, ihug and CallPlus be able to offer their own services and actually make a profit, prices should come down drastically thanks to the ensuing competition.

The unbundling decision will include a regulated price that will force Telecom to demonstrate the actual cost of providing internet services. Sources have indicated this could be as low as $8 a customer, but probably somewhere around $15, which means that competitors should be able to offer broadband for between $20 and $30 a month.

These won't be at the dreadfully slow speeds on offer today. The Government is also forcing Telecom to offer the fastest speeds its network is capable of handling, which has been found to be 7.6 megabits per second download - or twice what is now being sold.

Competitors will also be installing equipment capable of providing 24 megabits just as soon as the legislation comes in. New Zealand's internet is about to become a whole lot faster and cheaper, for real this time.

But the Government didn't stop there. Telecom will also be required to split its phone and broadband services from one another - a rare phenomenon known as "Naked DSL".

Broadband customers will no longer be forced to buy a phone line if they don't want one, and can instead use their mobile or a host of emerging internet-based calling services - which are either free, or practically free.

Only five other countries in the OECD have Naked DSL, but it is an emerging trend. The Government should be applauded for taking this forward-thinking and somewhat unexpected step.

The Government has also taken solid action in ensuring transparency at Telecom by demanding accounting separation, which will allow the public to see just how much money is being made off its network.

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