The industry left in limbo

The minister has announced a major change to our telecommunications industry with a view to ensuring certainty for investors.

In her announcement, the minister has made three decisions:

1: Bring forward the TSO review to start immediately;
2: Bring forward the review of the regulation to start immediately;
3: Extend the UBA wholesale review (in effect freezing it until after this review takes place).

TUANZ has always supported an ongoing review of the regulations that bind our industry. Having seen the massive changes in technology and customer use over the past five or six years it would be foolish not to. Our regulation must reflect both the industry and our users’ needs, so ongoing review is essential.

We also support a review of the TSO – that pernicious beast has caused more trouble than it’s worth and it’s high time we implemented a universal service obligation that focuses on end users rather than network builders.

Extending the UBA review means we have a half-house regulatory regime in place until after this new review has been completed and that troubles me.

In December I wrote about the regulatory process and why it’s important to ensure politicians don’t meddle in an ongoing process. Regulatory certainty only comes about via an arm’s length process where investors can be sure the rules of the road are dictated by the regulator and not by the politicians of the day with one eye on the polls.

All this has come about because a rule the government put in place when it last revamped the Telecommunications Act has proved unsavory. Chorus makes its money today from wholesaling copper services, yet by the end of the decade it will have built a fibre network that makes its copper lines surplus to requirements. Chorus (and Telecom before it) knew the rules going in. In exchange for separation, Chorus would win the UFB project and would expect to have the copper regulation set once and for all and left alone. That regulation would include moving from “retail minus” pricing to “cost plus” and that’s exactly what the Commerce Commission has introduced.

The government has chosen in effect to freeze that process and to leave the industry in limbo. We don’t have new pricing for wholesale services and we now face an intensive round of lobbying on our new regulatory process, something which in an ideal world would be as bloodless and clinical as possible but which now will no doubt be rather more exciting than that.

2 replies
  1. Kim Dotcodotnz
    Kim Dotcodotnz says:

    RobJS your points about NZ-based content consumption is correct. However, whilst not being able to address the link between NZ and the rest of the world, Chorus certainly seems to be doing its part in (a) ensuring that the NZ-onshore content is accessible at 21st Century speeds, and (b) is actively encouraging New Zealand’s ISPs to seriously think about moving away from traditional telecommunications mindsets and shift towards providing more and more OTT services such as locally-cached content. But Chorus cannot force Telecom, Vodafone, Slingshot and the likes to move to an OTT model – it is up to these ISPs to take the front-foot and shift their telco-model away from the traditional toll-calling cash-cow and instead towards onshore OTT services

    Reply
  2. RobJS
    RobJS says:

    I still think the point that is being missed at the highest level is that both UFB and Telecom’s today announced fibre network upgrade will drive consumption to new levels. Whatever the rights and wrongs of the process and the money to be made or lost, the point is that we are heading full speed to a brick wall. Why? We simply don’t consume content from NZ, we consume it from overseas. As soon as Chorus goes all fibre, Telecom upgrades and UFB is a force to be reckoned with, we will hit the limitations of our offshore Southern Cross cables. SC say that there are no limitations, that they can upgrade and that the network is only part way through all of its life. The latter two points are true, however once demand comes – and it will, just as better motorways attract more traffic – how much life will be left in their network then? How many outages, for how long, will NZ have to face during their performance upgrades? Some Australian ISP’s lost out recently due to an SC software upgrade so we know this can be a fraaught process. And using one cable while one is down doesn’t work for some transactions and for the volume of data that we are shifting nowadays, especially on the Hawaiian leg.
    I strongly contend that what we need is to address our offshore connectivity, capacity and resilience at the same time as looking at what is happening locally. We need an internet strategy for the nation, not a series of initiatives which suit niche players. This doesn’t mean huge government investment, but it does mean government direction and leadership. Cost and profit will then be an output of this process, and not a tail wagging the dog.

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