99.8% vote for Telecom Structural Separation

October 27th, 2011 at 12:00 pm by David Farrar

The vote of shareholders was 99.8% in favour of structural separation. This is the final barrier to separation occurring later this year,  into two new companies – and Chorus.

Business Day reports:

Communications Minister Steven Joyce said it was the most significant change in the industry for 20 years, when Telecom was privatised.

It is the biggest change in 20 years, and one of the most positive. It is superb that as a result of the Government open access policies, Telecom chose to separate. So many of our problems of the last decade or more have come about from the fact that Telecom was a vertically integrated monopoly. It is a far better model to have the access company separate to the companies that offer services over those networks.

The analogy I used to use is imagine if Air New Zealand owned the airports, and got to decide how much its competitors paid to land at them, what times they could land, had their own planes get quicker service etc etc.

With the benefit of hindsight, Telecom should have been separated when Phil Goff and colleagues sold it in the 1980s. We would have avoided many of the problems of the last 20 years if it had been. It was as natural that Telecom would try to exploit its access monopoly as it is natural a dog will lick its balls – because they can!

The Telecom of today, even pre-separation, is a much different company to the Telecom of old. I hope both Chorus and Telecom do well in thenew environment, Most of all I hope we get a more competitive market.

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One Response to “99.8% vote for Telecom Structural Separation”

  1. RightNow (6,841 comments) says:

    The logistics of the separation leave a bit to be desired for ISP’s. Existing agreements with Telecom Wholesale for resale of services have to be renegotiated with Chorus. An interesting condition in Chorus’ contract is that the reseller must have $50 million of indemnity. This is at least 10x more than was required with Telecom Wholesale, and most NZ insurance companies won’t even provide that level of cover.

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