Wow!
It’s out. The government has finally gained the courage to force Telecom to unbundle the local loop. Possibly the most interesting part of the whole announcement is the circumstances of it. Cabinet signed off on it this morning, by midday it had been leaked to Telecom and the Government was forced to scramble to announce it to everyone to avoid regulatory problems from the Sharemarket. No doubt whoever leaked it is feeling very very worried about their job security right now! The Cabinet briefing paper and minutes that accompanied the original press release are a bad quality scan and have obviously been prepared very quickly with hand written corrections to the page
numbers in the latter half of the document. The document has now been removed from the website, which I guess means that it is being touched up. Email me if you want a copy.
[Update 1am: It's now back, but has had information redacted presumably because it is meant to be commercially sensitive!]
If you want the hard facts the following are good sources:
So, is this a good a thing?
I think it is in the long term, but the best part of today’s announcement is what goes alongside the LLU decision, not the LLU itself. More on that in a minute. The Cabinet paper (60 pages) appears to be a very thorough summary of the detailed analysis that has obviously been performed over the previous months. What I think is a fairly reasonable argument is made for why the action is needed and why the chosen course of action is the best option. I’m very impressed with David Cunliffe’s handling of the portfolio and I hope that he continues to work to the high standard that he’s set himself in the few short months since the election. He’s certainly going to face some opposition now!
One thing to keep in mind in reading the paper and analysing the information available is that the Government’s hand was forced and there is probably a lot of implementation detail that they would have planned to release with the offical announcement on the 18th. So theres not much point in nit-picking details at this stage.
The meat of the announcement is that the Government has chosen a two-stage approach to increase the regulation in the sector. The two stages are basically short and long term actions designed to be complementary. The long term action is the LLU itself and promotion of investment in alternative infrastructure. Because this will not be completed and ready to use in any shape or form until 2008 at the earliest there are also a series of measures to beef up the current wholesale offerings to tide us over and improve the market in the interim.
What we get in the short-term:
- UBS without the 128k upstream limitation
- UBS that can support real-time services (VoIP, Games, etc)
- Naked DSL - no Telecom phone service required
With prices and access terms for all these services to be set by the Commerce Commision, which is directed to ensure that the pricing is applied to protect investment incentives.
There are a few juicy paragraphs that suggest the Government has considered opposition and is ready for it, such as 113 that warns that is Telecom does not invest quickly enough then full structural separation will be considered. However there are also suggestions (para 113) that Telecom is going to be thrown a bone in the form of a recalculated TSO that will provide higher levels of compensation to support the necessary network upgrades in rural areas.
Rodney Hide and no doubt other right-wing groups are already bleating about the “stolen” property rights. But as I see it thats not the case. Telecom still owns the local loop. ISPs do not get to use the copper for free! They must pay Telecom a market rent. LLU is about regulating that price and forcing Telecom to offer the service where there is no incentive for Telecom to do otherwise given their vertically integrated monopoly.
Secondly, Telecom was given a chance to avoid this scenario with the 2003 decision not to unbundle. At that point Telecom and its shareholders were warned that if they didn’t invest appropriately and provide a competitive wholesale market the situation would be reviewed. These warnings increased in frequency over the past year. Telecom cannot say that they were not warned. They may have massively misjudged the government, but they were warned. The simple fact is that over the last three years Telecom has played games and stalled as much as possible. In many ways I feel they are the authors of their own misfortune.
Overall, I’m very happy and excited. Its a great time to be involved in the Internet industry in New Zealand. The government has churned out an excellent paper that shows that they have carefully analysed the issues and decide on a course of action that I think has an excellent chance of improving the state of broadband in New Zealand. LLU is not viewed as a magic bullet, other measures have been put in place to ease its introduction and investment incentives to build the next generation of access infrastructure are mentioned and regarded as important. The big risk to watch is how the Government goes with the implementation. It is a hugely complex peice of policy to implement, with lots of potential for mistake and they are fighting against a well resourced company with lots to loose.
No doubt this will not be my last post on the issue.
[Update 8/5/2006: Fixed typo 128k vs 512k, thanks for spotting Juha]