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The company has effectively defeated any attempt to force the unbundling of the local loop in an incredibly cunning way.

Our favourite telco (and local loop monopoly holder) has just announced that it's going to retrofit its entire network -- converting it into a state-of-the-art IP-based hi-speed data service over the next few years.

Forget about analogue voice calling, dial-up modems, and even DSL broadband -- we're talking about a hi-speed digital data conduit that can deliver audio, video, control signals, VOIP and just about anything else you could imagine in this digital age.

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To allow other players to start sticking their gear in exchanges and cluttering up the existing network would clearly make life a lot harder for Telecom to roll out its new world order.

What's more, by converting its PSTN to an IP-based service, Telecom can then claim that there's no longer any benefit to unbundling the loop -- after all, *anyone* can then layer their application services over the company's transport layer.

Of course this won't necessarily mean that we (the consumers and customers) will be any better off -- because Telecom will still own that transport layer and will be able to charge users whatever it wants to.

All that we'll be doing is shifting the monopoly to a digital level as well as a physical one.

The first step in this transition from today's PSTN to the "new" network is going to cost a mere $220 million, or just a fraction of the company's annual profits.

That's peanuts of course, compared to the total investment that will be required to get us all hooked up and mainlining their IP opiates. The final sum is purported to be around $1.4 billion -- although that's still only a few short year's worth of profit.

So where will this leave all the other ISPs who are currently forced to go cap in hand to Telecom and beg to resell their DSL service?

Well I fear that they'll be even more disenfranchised than they are today.

They'll still be left reselling whatever Telecom feels like letting them resell, for whatever margin Telecom decides is appropriate. Yes, the Commerce Commission will groan and moan about the unfairness and governments will make idle threats -- but it'll be status quo right into the future.

My prediction is that the more savvy ISPs will find some highly profitable niches by bundling IP-based services and content into packages that will appeal to all those highly connected Telecom customers. After all, the role of ISP (as we know it) may well disappear completely -- since everyone will be connected via broadband IP by default anyway.

My little notebook has a long list of really cool (and potentially very profitable) services that ISPs should be looking at right now, if they want to evolve into the kind of provider that will survive in the post-ISP era. If there's interest, I'll post a few next week.

But what do you think about Telecom's announcements?

Will this really scuttle any talk of unbundling the local loop?

Will it spell the death knell of the ISP industry as we know it?

Telecom says that this new system "has the potential" to reduce costs for customers -- what do you reckon are the chances of this potential being realised by a Telco that will simply be extending the tenure of its monopoly on the transport layer?

Go have your say in The Aardvark Forums

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