Orcon letter raises valid concerns over cabinet access

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Posted Thu 30 April 2009 @ 4:05 p.m. by Louis van Wyk

An open letter to the Commerce Commission from Orcon raises serious concerns over the future of competition in the broadband market.

In the letter, Orcon CEO Scott Bartlett says local loop unbundling was a huge step forward in improving competition in the local telecommunications market, allowing his company to invest in delivering a better broadband experience.

However, he says there is now a “very real risk” that Orcon and other ISPs will be precluded from investing any further in the broadband market.

At heart of the issue is sub-loop unbundling – the process through which other operators will gain access to Telecom’s roadside cabinets.

The Commerce Commission is due to release a determination on sub-loop unbundling that will regulate access to the cabinets. This will include how much Telecom charges other providers for access.

However, Orcon believes Telecom's proposed pricing would leave little room for even a modest return on its investment in sub-loop cabinet equipment.

This is a crucial point and one also previously raised by Vodafone.

In an interview with NBR, Bartlett explains that it would cost Orcon $630 a month to rent space for its equipment in a cabinet, plus a further $700 to $900 in backhaul charges. In addition, it would have to pay $130 to connect each new customer to a cabinet, compared to $75 for an unbundled exchange.

At these rates, Bartlett says Orcon would need 20 to 25% market share in any given neighbourhood to make installing its own gear worthwhile.

What is at stake here is the future of the hard-fought-for gains achieved through local loop unbundling.

Many of the roadside cabinets are being installed around exchanges that have already been unbundled.

A ring-fence of cabinets around an unbundled exchange effectively cuts off companies like Orcon and Vodafone’s access to a large number of users who would then no longer have a direct link to the exchange.

In fact both Orcon and Vodafone say that cabinets could effectively shut them out of half the residential broadband market.

Therefore, it is not surprising that in its letter Orcon refers to the Commission’s upcoming determination on sub-loop unbundling as “another significant milestone for progress” in the telco industry. In the letter Orcon urges the Commission to ensure viable competition results from its determination.

Bartlett writes: “If companies such as ours cannot gain viable access to cabinets, competition will wilt and eventually die. And consumers will still be paying too much.”

This highlights why it is imperative that fair access to the cabinets is secured. If not, the clock will be turned back on the advances achieved through local loop unbundling.

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

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2 comments

• Richard says:

  My question however is this, if fibre fed cabinets are not put in then the overall performance of DSL (something that competition is supposed to fix) does not improve, how is this beneficial to the end-users?. Simply putting your own broadband kit (that effectively has the same performance as another providers kit) does not in reality improve anything. Every unbundled exchange I have seen already has ADSL2+ Telecom Wholesale kit in it, and VDSL is on its way. By putting these cabinets in, the Broadband performance is increasing for every single customer migrated, how is this bad? I don't know about you but to my mind the real competition that matters is services and offer to market assuming everyone is on a level playing field, with FTTN and EUBA I dont see how they are not. The performance of the entire playing field is being increased by FTTN so why complain. What should be done however is have a single, open access physical infrustructure and give ISP's the ability to aggregate bandwidth to their core platforms so they can then provide the services, offers to market, and add-ons that their customers want. This is where real competition occurs and what worries me is that when the FTTH plan is finalized we will be stuck in the past with the belief that layer 1 infrastructure is where the competition occurs. Offers to customers should be switched in software, not hardware. By offering differentiation that requires a customer to switch providers at Layer 1 or 2 you are stifling competition by introducing barriers to shifting providers that do not need to be there in an open access network world.

  Added: 1 May 2009, 3:13 p.m.

• Mick SC says:

  To what extent has Telecom located its Cabinets to make co-location of an independent Cabinet as difficult as possible? we need feedback here.
  
  There is a true cost to installing a DSLAM for N outlets to subscribers. Each DSLAM has to be housed and fed. This carries a cost, and can be analysed. There is an opportunity price that clearly Telecom is happy to charge.
  
  It is hard to see why the Independents' customers should pay double for connection the amount that Telecom's customers do.
  
  Regarding backhaul, the pricing mechanism/model will have to be the same for all parties. Once the conduit is in the ground the marginal cost of another cable carrying whatever number of cores is low.
  
  There is a risk regarding timing of the utilisation of the backhaul conduit. This can be overplayed.
  
  Northpower has shown that overhead reticulation of FO cables on power lines is unobtrusive: only the technically minded could tell the difference between a low voltage conductor and a FO cable. This represents a major saving. We could see Overhead reticulation of FO with GEPON via power poles and overhead feeds into houses competing head on with cabinets full of DSLAMS. GEPON can go 15km from its switch: ADSL2+ only 2km. VDSL has an even shorter range.
  For an urban situation, the going rate to the customer for thrusting/trenchless laying a conduit under the forecourt is $40/metre. The actual cost is at a considerable discout to this.
  
  let's see FO leapfrog te ADSL2+ cabinets. With the Super City, the ideological barrier in North Shore City to overhead reticulation can be swept away.
  
  Once the overhead power lines are undergrounded, then all the conductors, Copper/Aluminium and FO can go in together.
  
  The all-Telecom/Chorus model is a disingenuous attempt to restore some sort of monopoly in favour of Telecom. Ugh!!
  
  
  
  

  Added: 1 May 2009, 6:33 p.m.