Telcos Call for Tough Line With Telecom

By STEEMAN, Marta

Companies say a pull-back by TelstraClear shows telecommunications competition is not working.

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TELEPHONE companies are urging the Government to get tougher with Telecom in the wake of a TelstraClear retreat from competing head- to-head in the residential market.

TelstraClear is the second-largest fixed-line company in New Zealand, but says margins in the residential market where it resells Telecom services are too slim to be profitable.

Companies are calling on the Government to re-examine local loop unbundling, which would force Telecom to rent its copper lines network to other companies.

Telecommunications commissioner Douglas Webb rejected unbundling almost two years ago and the Government reluctantly agreed.

Most developed countries have adopted unbundling to force competition into the lucrative residential market and into high- speed Internet services delivered over copper wires.

Some in the industry believe TelstraClear’s retrenchment is a huge blow to competition.

Ihug chief executive Mark Rushworth said the Government should re- examine unbundling the local loop.

“Competition isn’t working in the New Zealand telecommunications industry, and I guess the people who lose out are consumers. There’s less choice and prices will go up as a result.”

Any player reselling Telecom’s home line service (called access service) had to buy it from Telecom at only a 2 per cent discount to Telecom’s retail price.

“We’d love to sell local access . . . but 2 per cent doesn’t cover your billing. God help you if a customer wants to call and ask you a question,” Mr Rushworth said.

Companies said it was a huge blow to competition in New Zealand that TelstraClear was narrowing its focus. The company announced on Monday it would concentrate on the corporate and government market and residential consumers on its cable networks in Wellington, the Kapiti Coast and Christchurch.

Slingshot said the regulator in Australia, as in other countries, had unbundled the local loop and was splitting up Telstra.

“Our message to the minister is: `It’s time to rethink’,” Slingshot chief executive Annette Presley said.

She criticised Communications Minister David Cunliffe and Mr Webb for lack of leadership and a light-handed regulatory approach.

The Government needed to act to create competition in the two areas of Telecom’s dominance — access lines and high-speed Internet services.

“The current regulatory regime is absurd,” Ms Presley said. Wholesalers had to pay Telecom more for a line than Telecom’s retail customers and companies such as Slingshot ended up selling below cost.

“Unless a different approach is taken by the Government, New Zealanders will continue to have limited telecommunications services at an inflated price.”

Australian analyst Paul Budde said the move dealt a huge blow to competition and was a victory for Telecom. Telecom’s shares rose 4 cents yesterday to $6.08.

Mr Budde said TelstraClear had been the main party to challenge Telecom and secure rulings other companies had benefited from. Its lobbying power had been valuable.

New Zealand, more than any other western country, depended on telecommunications for development. Without competition, Telecom would continue to delay new services.

“It is completely up to the Government and its regulators to avoid such market dominance and to stimulate innovation through competition,” Mr Budde said.

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