Sponsor's Message

Just a few short months ago it began to look as if the prospect of lower-cost DSL services was just around the corner, spurred by the seemingly certain unbundling of the local loop in the wake of a draft Commerce Commission report suggesting such a move.

However, in a move that defies logic and smacks of cronyism, the Commerce Commission has announced that it's changed its mind and is now believes that unbundling is not the answer.

Now I know that The CC has always been reluctant to upset Telecom in the past, but surely someone must be sleeping with someone at the highest level for this type of about-face and sheer lunacy to prevail?

Just what was the reason given for denying true and open competition in the provision of DSL services to NZ consumers?

Well the Telecommunications Commissioner, Douglas Webb has been quoted as saying that "The Commission is no longer recommending unbundling of the local loop, because of what we have learnt about the costs and difficulties of that solution in comparison with the potential benefits".

Readers Say Got something to say about today's column, or want to see what others think?  Visit The Forums Have Your Say

Now doesn't that sound like a Telecom press release?

The CC would have us believe that, despite its recommendation not to force unbundling, competition in the DSL marketplace can be created by way of requiring Telecom to sell its DSL services to other players at a wholesale level.

Err... excuse me.. but this still leaves Telecom with a huge amount of control over the costs that any competitor will have to pay to deliver their connectivity to the customer.

This is patently ridiculous and still leaves Telecom with its monopoly on the last mile.

Now, while I'd really like to believe that Telecom would provide their DSL service to competitors at fair and reasonable rate -- honest I would, but I really don't think it will happen. It might be tempting to think that through such a wholesaling arrangement, other ISPs could finally offer flat-rate broadband -- or at least povide a far more cost-effective service than Telecom presently does -- but it's just not going to happen.

The reason why Telecom has been charging up to 20c/MB for *local* traffic delivered via JetStream is now very apparent. By doing this, they can claim that the cost of opeating the DSL segment is linked to the number of MB delivered and thus, if forced to wholesale the service, can effectively demand a per-MB wholesale fee from competitors who only want access to DSL to bridge that last mile.

And one only has to look at the huge amount of acriomony and delay that was involved in the negotiation of a reasonable interconnect rate when Telecom was forced to work with competitors in the POTS (plain Old Telephone System) market to realise that the chances of competitors getting an even break on the wholesale rates are remote. Does the CC really believe that somehow DSL will be different and Telecom will instantly become fair, ethical and reasonable in its attitude to striking a wholesale rate?

Of course we should remember that this is only a recommendation to government and, if Jim Anderton, Paul Swain and their budies have half an ounce of commonsense, they'll ignore it and persue the unbundling option.

Oh dear -- after re-reading that sentence I can't help but feel we're about to be stuck with one of the world's most expensive DSL services for the forseeable future.

The government really ought to think very carefully about this decisions. While it might be so much easier to simply take the CC's advice and leave Telecom with its monopoly, to do so would represent a huge political gamble that might well drive even more of this country's best and brightest into the arms of more tech-friendly countries.

What do you think?

If any Aardvark readers want to share an opinion on today's column or add something, you're invited to chip in and have your say in The Aardvark Forums or, if you prefer, you can contact me directly.

Contacting Aardvark
I'm always happy to hear from readers, whether they're delivering brickbats, bouquets or news tip-offs. If you'd like to contact me directly, please this form. If you're happy for me to republish your comments then please be sure and select For Publication.

Other media organisations seeking more information or republication rights are also invited to contact me.

Just add a couple of lines of JavaScript to your pages and you can get a free summary of Aardvark's daily commentary -- automatically updated each and every week-day.

Aardvark also makes a summary of this daily column available via XML using the RSS format. More details can be found here.

Contact me if you decide to use either of these feeds and have any problems.

Linking Policy
Want to link to this site? Check out Aardvark's Linking Policy.

Did you tell someone else about Aardvark today? If not then do it now!