Telecom Wholesale Has a Case to Answer

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Posted Wed 21 November 2007 @ 4:35 p.m. by Ernie Newman

Has the new friendly Telecom of the last eighteen months been a facade? Has the ugly, anti-competitive; scheming version returned? Did it ever go away?

Strong questions. But fair ones given the shock to the industry and users today of Telecom's announcement of its cabinetisation plans.

Cabinetisation in New Zealand was always going to be on a collision course with LLU, largely because of our extremely late adoption of unbundling. That lateness was of course, very pleasing to Telecom who had a lot to do with the misinformation and meaningless assurances given at the time that LLU was not necessary.

But that does not excuse the fact that the list of exchanges that Telecom elected to offer its wholesale customers some months back for LLU, and the list announced today of those that are early targets for cabinetising, look extremely similar.

How can Telecom now look its wholesale customers in the eye? It has encouraged them to invest in LLU in a group of exchanges, let them get several months down the track, then pulled the rug from under their business model.

That this is a coincidence, or a case of left and right hands, is almost impossible to believe.

Telecom Wholesale GM Matt Crockett tomorrow is fronting an industry meeting to explain all this. I don't envy him the task. He has personally been the face of Telecom Wholesale and has gained the trust and confidence of his wholesale customers.

Whether Telecom Wholesale still enjoys that trust this time tomorrow is an open question. There is a huge amount of explaining to do.

Categories: Fixed line carriers | ISPs | Regulatory | TUANZ policy | Vendors

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15 comments

• pigpen says:

  this is a cynical attack by the incumbent on investment. I hope they get what they deserve.

  Added: 21 November 2007, 6:08 p.m.

• KenE says:

  If you did not understand what the Telecom plan was going to look like before it was released then you don't understand anything of value at all about Telecom networks. The plan is obvious because there are no real options to do otherwise. Fairyland stories about radio solutons and other magic technologies are complete rubbish and any competent networker would have predicted the final plan. IDIOTS!

  Added: 21 November 2007, 11:01 p.m.

• Paul Brislen says:

  Telecom's stated aim has been to increase the coverage of broadband using cabinets as they're intended - as network extensions. Instead, yesterday's announcement sees Telecom cabinetising the three main urban centres and leaving rural and regional New Zealand to its own devices. On top of that, it's cabinetising exactly those exchanges that Orcon and Ihug have said they want access to. Meanwhile sub-loop unbundling (unbundling of cabinets) has yet to make it to the ComCom so don't expect anyone gaining access to a cabinet for quite some time. I don't have a problem with telcos trying to make money, but this kind of action is being taken with the aim of blocking competition and that's not acceptable.

  Added: 22 November 2007, 9:16 a.m.

• Jane says:

  This is hardly surprising however. Telecom's stated strategy has always been to shorten the local loop with fibre to the cabinet, with the copper then capable of delivering higher broadband via ADSL2. And being Telecom, these were always going to be in urban areas that give them the best ROI. What is disappointing is that they announced the list of LLU exchanges with great fanfare and that they are one and the same. However, some responsibility does rest with the access seekers who should have understood the risk and built it in to their investment plans. LLU this late in the day unfortunately was never going to be the golden bullet to solve last mile customer access on a nationwide basis - for a whole variety of reasons, not least this.

  Added: 22 November 2007, 11:02 a.m.

• Andrew says:

  Hang on a minute - aren't we all forgetting something? Consumers and businesses - isn't the whole reason the regulations were introduced was to deliver better services along the lines of what the Digital Strategy outlined. I also don't see how this "stops" competition like Vodafone is suggesting above. What it does do is reduce the amount of profit they can make from relatively minimal investment in LLU equipment - get out there and build more networks - citylink, smartlinx, the loop, Telstra ... others are already doing it - that's where real competition comes from.

  Added: 22 November 2007, 11:49 a.m.

• Paul Brislen says:

  Hi Andrew, it doesn't stop us from making a profit. It stops us from investing in the first place. Currently we are investing in LLU in the exchanges to the tune of around $500k per exchange. For that we can unbundle thousands of lines. That's economically viable. However, with cabinets, we can only unbundle dozens at a time so the cost per line goes through the roof. I agree real competition comes from building your own network (we have) but you cannot compete with an existing infrastructure on an even footing. Nobody is going to build a second national network to this extent - it's uneconomic and unnecessary. We already argued this out and Telecom has been told to open up its lines to all comers. That's what this is about.

  Added: 22 November 2007, 1:12 p.m.

• David L says:

  Minister - Your Answers please, In Telecom’s UCLL brochure, section on Geographic Availability, it says: “Note the UCLL service is not available on copper local loops that terminate on active cabinets.” 1. What does this mean in practice, wrt the MPF (telephone wires!) in our streetside cabinets ? 2. What defined facilities (if any) are NOW available to provide shared services DIRECTLY to the copper subloop, eg RF backhaul to either a “fibered cabinet” (multiplexed fibre or ethernet interface?) or especially an unfibered cabinet (with no Telecom fibre backhaul to the local exchange). IF NOT - WHY NOT ?? 3. What’s the status of the RMA process for Street Cabinet access ? Thank You - your humble long suffering VOTER David Lawton

  Added: 22 November 2007, 4:48 p.m.

• David L says:

  Minister / Matt (@ Telecom), Answers please, (Rhetorical questions?) In Telecom’s UCLL brochure, section on Geographic Availability, it says: “Note the UCLL service is not available on copper local loops that terminate on active cabinets.” 1. Does this mean in practice, that no SUBLOOP copper access was actually WRITTEN into the agreement ? 2. What defined facility (if any) is available to provide shared services DIRECTLY to the copper subloop, eg RF backhaul to either a “fibered cabinet” or especially an unfibered cabinet (with no Telecom fiber backhaul eg. The Pt Chevalier to exchange DSL distance issues… 3. What’s the current status of the RMA process for Cabinet access ? Thanks

  Added: 22 November 2007, 6:24 p.m.

• Stephen says:

  Why did Orcon and Ihug choose those specific exchanges for the first experiment with LLU? I suspect that it is due to some favourable fundamental economics. Perhaps these same economics have driven Telecom to “cabinetise” these same exchanges. “Cabinetising” will ultimately enable more effective delivery of ADSL2 services – this service cannot be as effectively delivered over the long distance from the exchange to the home/business, and these same ISPs complaining (who know doubt also want to offer ADSL2 services) know this only too well.

  Added: 22 November 2007, 8:02 p.m.

• John says:

  Unconvinced by any of the foregoing. Who cares about the method? All we want is performance (High speed, High volume, low cost, Now!). All the ongoing discussion achieves is delay. It plays into Telecom's hand and also into the Government's hand. They can seem to be doing something while being totally ineffective.

  Added: 23 November 2007, 11:28 a.m.

• Paul C says:

  Chasing the Dragon I get very annoyed when I see headlines like "savage reaction from Telecom's wholesale customers" and the like, because it tars us all with the same brush. For the record, WorldxChange Communications does not, and never has, held an interest in LLU or UCLL (due to it being completely non-viable in our opinion) and we have no wish to be lumped in with those in the industry who are now trying to cry foul about the cabinetisation plan. In fact, three years ago we wrote our strategic business plan around being able to offer fullyconverged services via Telecom's wholesaled NGN-based bitstream products supplied to us from either the NGN cabinet and/or exchange equipment based on the freely available data supplied by Telecom about their NGN technology choices and their rollout plans and approximate schedules etc. Having personally attended every Telecom briefing that has been held on NGN, LLU and Naked Bitstream services over these past three years, I can state for a fact that none of what Telecom has purportably suddenly released to their competitors is new to anyone who was paying attention. I can also confirm that each company that is now grinding and gnashing their teeth over an apparent conspiracy theory also had their own representatives who attended each briefing session as well. So, apart from the fact that Telecom has telegraphed (many times) to all and sundry what their intentions were under their NGN programme, even Stevie Wonder could have seen and understood (no offence Stevie) what the the impact of cabinetising would be on any Access Seeker's LLU strategy. Telecom can quite rightly be accused of "gaming" the regulatory environment on occasion in the past but I struggle to understand why some industry players are now very publically trying to make their own lack of apparent understanding and foresight suddenly Telecom's problem and thereby trying to paint the Telecom-of-Now as the Telecom-of-Old at such a crucial time for the industry overall (Operational Separation, Regulatory Determinations etc). Telecom has come a long way in rebuilding (and in some cases simply building) the relationships with their competitors over the past 12-18 months and the industry now has an environment whereby "stuff" actually gets done in a semi-pragmatic and timely fashion. It would be a massive step backwards for the industry and our collective customers alike if this recent rift was to set us back 3 years in how we deal with each other. It would be useful if these Heads-of-Sheds that are complaining took a breath and asked themselves why their respective companies have so obviously been taken by surprise by Telecom's last announcement. Perhaps there is a communication problem after all - but maybe it is an internal one. I personally hope that is the case because the alternative is much scarier....that they got taken by surprise because the people who are supposedly shaping the future telecommunications offerings to all end users in New Zealand simply do not understand the technology and how it works. The bottom line is that the Telecom NGN project - including the cabinetising part - will give Kiwi's better and faster broadband access that will support fully converged voice/data/internet services at less than what they currently pay now. And that is about the only thing that New Zealand has won this year so don't knock it....... Paul Clarkin Director, Operations & Carrier WorldxChange Communications Limited

  Added: 23 November 2007, 11:50 a.m.

• Keith S says:

  All the more reason to take the network off Telecom and turn it into an SOE (solution put forward by Rod Drury). This is the only solution to prevent a huge waste of money with multiple providers all putting in their own cabinets and simply trying to duplicate Telecom. New Zealand Inc cannot afford this unnecessary duplication. Why doesn't the government wake up to all this LLU nonsense - it will never work! Get off your arse and set up a network SOE and make it solely responsible for all network access (copper, fibre, mobile and wi-max) and wholesale the access to any provider that wants to sell services. If we start now we might just get lucky and make it into the Top 10 of the OECD after all!

  Added: 23 November 2007, 1:51 p.m.

• Ed says:

  Agree totally with John above. All we want is Speed, volume, a fair cost and consistency of Service... "A major feature of my current connection is that I can tell when Coronation St is finished" ....................I do not care who delivers it or why, just deliver it.

  Added: 23 November 2007, 2:07 p.m.

• Lallika says:

  I like the parallel found for the cabinet of Herr Doctor Caligari; makes me accept he is German and german-thinking. Doctor Reynoldari is - I believe - an Auistralian, would I be wrong to believe he is australian-thinking? A decuction like this seems to be logical. I am 91 years old and I pride myself on the fact that despite a long life I have not lost my youthful naïvety. Telecom New Zealand is but a -(handy to earn woolbales of money with)- toy for Doctor Reynoldari. And another thought: nothing wrong to think australian-thinking thoughts for this Australian. NOT to do so would in my judgment be tantamount to High Treason! And what are we thinking of. It still is Telecom New Zealand, or am I mistaken? This nightmare scenario gives me da kreeps, not to mention it would be hair-raising, if I had any left to raise, on my bald pate. I know it's naughty of me to write this, but after reading the portentous, hi'fallutin' gobbledeegoock above this, I could not stop myself and tell y'all the The Emperor has No Clothes on! Enough said? Objectionable, actionable? Yeah, come on, let's be'avin'ya... Roadside cabinets? They make me remember the odious urinoires in France and Belgium of yore. And have you looked at the dogs these days? They seem to be the only souls which treat them to their current full value...

  Added: 23 November 2007, 2:13 p.m.

• Ariki Gell says:

  Thank God, the unbundling process is not going to plan, it might give us time to address the real issues around the potential success/failure of the unbundling process, the lack of trained and accredited staff. Our organisation has been focussing on the lack of Maori and pacific people in the ICT sector for sometime (phil Reilly for demographic stst please?), but doesnt make time to stuff our faces at overpriced conferences where we show off our executive titles. It gets in the way of real work. Telecom know this, and will just take a leaf out of Geni's book and poach its way to HR success. The others dont have the money had wont be able to compete. A case in question, how long does it take for telstraclear to answer the phone? Telecommunications is the poor cousin of the IT industry, it pays less and offers less career opportunities at present, our organisation has an engagement model and plan to address the chronic skills shortages does TUANZ? if Labour doesnt listen National is.

  Added: 23 November 2007, 2:42 p.m.