Kiwiblog

Someone has listed this phone on Trade Me as a Telecom XT mobile phone

As always, the Q+A are quite hilarious.

I tweeted last night that I felt very sorry for the many Telecom staff, as their XT network suffered another outage. It must be galling to see the company you work for get so damaged by outages that cause so much disruption. It’s probably like working for National in Parliament in 2002, which is why I can empathise!

A friend responded:

sorry David, but this chicken has been waiting to come home to roost for a while…you can’t outsource your maintenance, technology, customer service etc and expect to retain the core that makes a company strong enough not to fall into this sort of morass

And that’s a fair point. I recall one ex Telecom staffer semi-joking to me that I had to understand that Telecom wasn’t an IT company, it was a law firm that had contractors provide telecommunication services

Now Ernie Newman at TUANZ has called for possible Government action:

“Telecom needs to do something drastic to assist the customers it is repeatedly letting down,” said chief executive Ernie Newman in a statement.

“If it doesn’t, then it may be time for the government to step in as a national economic issue. This cannot be allowed to go on”

My first response to the call for Government action is to imagine Steven Joyce in builders shorts and a hard hat on a tall ladder at the top of a mobile phone tower, and he’s whacking something repeatedly with a spanner.

More seriously, I don’t see these outages as critical as if they had occured on the fixed line network, or the DSL network.

Telecom has a near monopoly on the final mile copper loop. If those networks go down, it can affect everyone in NZ, regardless of choice of provider.

But we have two and a half mobile phone networks in NZ, which are not dependent on the same infrastructure, and one can establish a presence on a competitor within a few hours, plus have number portability to keep numbers.

I’m not advocating that XT customers mass migrate – individual customers will make those decisions based on how many more outages there are, and what guarantees and/or compensation they get in future. But the presence of Vodafone and 2 Degrees means that customers do have options, if the frustration gets too much for them. And that knowledge that they may lose current and future customers will be providing the best incentive to Telecom (and its contractors) to get things right.

So I’d rather the Government doesn’t jump in at this stage. I’d have a different view if the outages were in one of the areas where they are a virtual monopoly, but this is not the case with the XT mobile network.

The HoS reports:

A kiwi salesman was stunned to receive a $1100 bill from Telecom for just 10 minutes of internet access from his laptop.

Michael Crake racked up the charges after using a computer fitted with a mobile broadband device while at Sydney airport.

Oh dear. He got clobbered with the outrageous $30 a MB that Telecom and Vodafone extort from users who roam overseas.

The price charged is massively higher than that faced by users from many other countries that roam. It has zero resemblance to actual costs.

But putting that aside, my bigger gripe is that the telcos do not do enough to inform people of this charge.

When you roam overseas it should flash up a huge warning that tells you what the cost will be on that network, and require you to confirm that you understand the price and accept it.

The Dom Post reports:

The Commerce Commission has opened the door to mobile phone companies sharing a 4G mobile network, saying it would be willing to engage in “appropriate discussions” on issues that may be relevant to network sharing.

Telecommunications Industry Group chief executive Rob Spray suggested in December that Vodafone, Telecom and 2degrees could build a 4G network using shared cellphone towers and radio spectrum that they jointly owned, to avoid a proliferation of cellphone towers.

2degrees chief executive Eric Hertz expressed support for the idea, while Telecom said it was open to it in principle. However, Vodafone feared that any move to a single mobile network might fall foul of competition law.

A commission spokesperson says the Commerce Act does not bar such arrangements, except where they might greatly lessen competition.

I think it is very sensible to avoid duplication in infrastructure for mobile phones. The competition should come in services and applications.

In fact an idea which has occured to me, is that regional fibre companies could be tasked with responsiblity for future cellphone towers in their areas. My rationale is:

• RFCs are set up to provide infrastructure to telcos and ISPs
• RFCs are not allowed to be majority owned by a telco that provides services or applications
• As more of the Internet goes over the mobile network, you need better backhaul from cellphone towers, so who better than the local fibre company
• The telcos might even consider selling their existing cellphone towers to RFCs

Of course at this stage we don’t have any RFCs yet, but once they are established it may well be a conversation worth happening.

Chris Barton writes:

I generally don’t like unsolicited strangers at my front door trying to sell me stuff.

So when the young guy turned up last week I adopted my usual, somewhat abrupt, I’m-not-buying-anything-from-you manner.

“Hello, I’m from Telecom and just wanted to ask whether you’re happy with your broadband and phone service?” …

But because I may have just witnessed a landmark event in telecommunications history – the first occasion in my lifetime that Telecom has actually touted for my business.

The slothful corporate has always assumed my business was its monopoly right. Has competition finally arrived?

I think that is a positive sign. May it continue.

The Herald writes about Telecom’s new logo, and the debate about whether it is a snowflake, or a spark.

The best suggestion I have seen was on Twitter, where someone suggested it represents the small print in the contracts, which is normally denoted by an asterisk

To be fair, I do prefer the new logo to the old one, which was very dull and corporate.

As usual, Chris Keall has the best summary of what the offers are on mobile termination rates:

Commerce Commission proposal
Voice calls: immediate halving of MTR on voice calls from 14 cents to 7.5 cents. Glide path to 3.8 cents by 2015.
Txt: immediate cut from 10 cents to 3.8 cents. Further cuts to 0.5 cents by 2015.

Vodafone
Voice: Looking to head off regulation with offer to cut MTR on voice calls to 12 cents per minute from April 2010, with glide path down to 73 cents a minute by 2015.
Txt: 1.2 cents from April 2010.

Telecom
Voice: cut to 12 cents per minute from January 2010. Glide path down to 7 cents per minute by 2015.
Txt: no offer
Expresses support for bill-and-keep, an alternative to MTR that sees the a phone company whose network initiates a call pay all costs.

2degrees
Wants MTR scrapped on all voice calls and txt. Prefers bill-and-keep model (initiating caller’s telco pays all cost). If that’s not possible favours immediate drop to 6.54 cents per minute for voice, falling to 3.45 cents by 2015.

So let us look at voice calls first. In 2010 the rate would be 7.5c under the Commerce Commission proposal, 12c offered by Vodafone, and 12c offered by Telecom.

By 2015, the rate would be 3.8c under the Commerce Commission proposal, 73c offered by Vodafone, and 7c offered by Telecom.

For text messages in 2010 the rate would be 3.8c under the Commerce Commission proposal, 1.2c offered by Vodafone, and 10c offered by Telecom.

By 2015, the rate would be 0.5c under the Commerce Commission proposal, 1.2c offered by Vodafone, and 10c offered by Telecom.

It is good to see Vodafone offering a more tempting package, with the huge drop in termination rates for text messages.

Also interesting to note:

Telecom’s numbers are close to those of its previous submission. More noteably, the telco has also expressed support for bill-and-keep – an alternative to MTR in the US and elsewhere that sees the phone company that initiates a call paying all costs.

I don’t think that is explained right. With bill and keep there is effectively a zero interconnect fee or termination rate. It is pleasing to see Telecom moot that. I think it is a superior model.

Think how retarded the Internet would be if ISPs charged each other 10c an e-mail?

Also pleasing has been that the Minister has ruled out any last minute negotiations with telcos on the proposed regulation. Trevor Mallard fell into this trap of privately negotiating a deal. Steven Joyce has said that any commercial offers have to go to the Commerce Commission, not him. And then once the Commerce Commission makes a recommendation, he will either accept it or not accept it – but won’t get into a game of considering ever increasing (or decreasing) commercial offers every few days.

It will be interesting to see what the final Commerce Commission recommendation will be.

Note that my company has done some market research for Exceltium Ltd on the issue of mobile termination rates, but all views are my own.

I doubt there has ever been a better (or worse) case of unforeseen consequences that the former Telecom Kiwishare, now known as the Telecommunications Service Obligation.

It had the best of motivations – to protect rural New Zealanders whose phone lines could be deemed uneconomic by requiring Telecom to still provide them with flat rate local calling at at an inflation adjusted price cap.

The first failure has been the price cap. The cost of telecommunications has dropped massively over two decades. But guess what happens if you have a law that says Telecom can increase line rentals by no more than the rate of inflation. Well not only do they not drop prices, almost every year without fail they increase line rentals by the rate of inflation. A price cap becomes a price target.

The second failure was its effect on competition. It not only kept competitors from offering services to rural NZ, it made them fund Telecom for its so called “uneconomic” customers. Tens of millions of dollars went from struggling competitors into Telecom.

So after years of discussion, we’ve finally had decisions to make changes, by Steven Joyce. They are:

Currently Telecom receives approximately $70 million per annum largely to compensate it for supplying local service to rural customers.  This money is sourced from the industry via the TSO levy which is paid by market participants (including Telecom which contributes approximately 70%) on a market share basis.

Mr Joyce says he is concerned by the lack of transparency around where this money is spent and whether rural customers are benefiting from it.

“The existing TSO levy has been in place since 2001 and has been a source of considerable controversy within the industry. A recent review of the TSO had identified that the current methodology for assessing how much the TSO commitment was costing Telecom a year was flawed.

The current TSO levy methodology counts the costs Telecom incurs but does not include the full range of benefits Telecom derives from the TSO.

The government is proposing to change the methodology for how much Telecom is compensated for uneconomic customers.  By counting both the costs and the benefits of the TSO it is likely that the TSO levy will reduce to zero for the foreseeable future.”

The non inclusion of benefits was a cause of considerable angst for the competitors who paid $21 million a year to Telecom. This decision has near universal support.

However the telcos are not getting to keep all the money they used to pay:

“We’re proposing to fund the $300 million rural initiative through a combination of direct government funding and revenue from a more transparent and effective industry levy than the current TSO levy.”

The government will provide a direct contribution of $48 million and further interim funding of up to $52 million.  The remaining funding will be sourced by replacing the existing TSO industry funding with a more transparent contestable industry-wide mechanism that focuses on developing rural telecommunications.

The new telecommunications development levy to replace the TSO levy would look to recover around $50 million per annum over the next six years – about $20 million less than is currently the case.

“When the government tenders for the provision of rural broadband it will be an open and competitive process, with full transparency on where the money is spent,” says Mr Joyce.

So around 70% of the old levy will still be collected, and used to fund rural broadband. This part is less than popular with the telcos, but very popular with Federated Farmers.

A more purist model would be to have the Government fund rural broadband development directly (if one accepts there is an economic gain in doing so), but the model announces is quite cunning because competing telcos are still pretty happy to be funding $15 million a year to a fund which is contestable and will actually increase broadband infrastructure, than $21 million a year to Telecom merely to maintain the status quo.

Telecom of course does not do so well as it used to collect $21 million for doing basically nothing, and paid $49 million to itself for the same thing. It will now pay around $35 million to the Government for the contestable fund. Some consolation to Telecom, is that they are in the best position to win most of the tenders for using the funds.

The Herald reports:

Vodafone chief executive Russell Stanners said it was time for reform of the TSO.

“The TSO regulation was introduced with the best intentions but has become a millstone around the neck of the industry.”

Telecom said it had been part of an industry-wide push to secure reform of TSO arrangements.

“This reform is long overdue and needs to be based on principles of contestability, transparency and technology neutrality,” Telecom chief executive Paul Reynolds said.

“It is equally important that any subsidies applied to fund services to uneconomic customers are borne equally by all consumers, and not just Telecom’s.”

Federated Farmers welcomed the plan but said it was approaching it cautiously until more details were known.

Pretty much everyone agreed on the need for reform, and most will say this is going in the right direction.

The Telecommunications Industry Group (TIG) said the plan amounted to a $252 million industry tax.

“The Government has just replaced one form of taxation with another, in an industry where prices are dropping, margins are tight and customer expectations are increasing,” said TIG chief executive Rob Spray.

They are right, except of course it is replacing what was an even higher $350 million industry tax. It is a move in the right direction with both a dropping of the amount levied, and a change in what it is used for.

Economist blog Progressive Turmoil, blogs favourably on the decision, and has a neat little graph too.

In light of the Government’s fibre to the home proposal, there seem to be three distinct paths forward for Telecom. They are:

Structural Separation

If Chorus is sold off, then Chorus would be in a very strong position to effectively gain most of the $1.5 billion on offer, by partnering with the Government to set up many of the regional fibre companies – or even one national fibre company.

The likely sucess in gaining most of the $1.5 billion would increase the value Telecom would get by selling Chorus. Also Telecom might not have to sell all its shareholding in Chorus – it could, I beleive, still retain a minority stake as an investment.

This would leave Telecom with its wholesale and retail arms. They would probably immediately have most of the current obligations imposed on them, such as equivalence, dropped.

With much reduced capital expenditure needs, and a cash inflow from the sale, Telecom should be in a position to increase the dividends it pays.

The downside will the inability to leverage the advantages of also owning the existing infrastructure. They’ll be paying an outside company to utilise their lines – the same as everyone currently has to do to Telecom. They will also be more at the whim of the market. If they lose market share to competitors, they won’t have the compensation of the fact the competitors are still paying them access fees.

Infrastructure companies tend to be safer, but have lower dividend returns. Competitive companies are a more risky investment, but can produce higher returns.

Participate as a minority partner

If Telecom do not structurally separate, then they are deemed a “partner” that owns a retail operation. This does not preclude them in any way from full participation in one or more local fibre companies (or even to still propose they be a partner in a national fibre company).

The key restriction is that will not have the right to appoint a majority of Directors to the Board of the LFC, and the Chair of the LFC Board must be agreed unanimously by all shareholders.

I’m not sure how important control of the Board of an LFC will be to Telecom. The initial partnership agreement with CFH setting out terms of investment and how extensive a fibre build will be is arguably the more important factor.

It is quite possible Telecom could decide to participate and invest in one or more LFCs. This will also help protect their investment in current legacy assets.

Do not participate

The third option is for Telecom not to bid to be a partner for any LFCs, or they do bid and are unsuccessful.

If this is the path chosen, then Telecom will be in a fairly strong position to ask for some of the current requirements imposed by operational separation to be removed. There would be issues over timing, of course.

It is likely Telecom would not undertake any more major infrastructure investment (such as further cabinetisation or further upgrades to VDSL2) beyond their current commitment of $1.4 billion. This would save them money in the short term, and in the long term they would become a customer of the LFCs for their higher speed products.

Telecom could do quite well relieved of the need to keep rolling out faster and nearer infrastructure. For many of their customers, the current speeds will be adequate for some time.

It is possible that they might keep up an aggressive investment programme to try and compete with the local fibre companies, and even drive them out of business. That would be a very ballsy call though, considering the firm policy of both major political parties is that the future fibre infrastructure must be open access and not part of a vertically integrated monopoly.

Telecom’s decision is going to be one of those really big ones – on much the same scale as which mobile phone technology to go with. The wrong call can cost a lot of money. The senior staff and board have an unenviable task looking at their company, considering its strengths and weaknesses, and deciding on the best path forward.

The Herald has some details of the deal:

• TiVo is launching in early November.
• Telecom will take an unspecified share of the $899 cost for a set top box and offer its customers free broadband for downloads of movies and unspecified free advertising-funded content.
• It will take no share of TiVo’s income from pay per view movies so income will dry up while it has an ongoing cost for free broadband for TiVo content.
• Telecom says it owes consumers more details of the TiVo offer before they pay $899 for a set top box.
• It would not disfranchise customers, though would not rule out changes.

I think this is a very smart move by Telecom. While I am a very happy MySky customer, I understand TiVo is even more advanced in terms of functionality. And the ability to legally download movies on demand is the future.

I’m very very happy with today’s announcement from Steven Joyce:

Communications and Information Technology Minister Hon Steven Joyce today released the details of the government’s $1.5 billion ultra-fast broadband investment initiative. …

Key highlights of the proposal include:

• An open, transparent partner selection process, which will be initiated in the next month.




• Government investment directed to an open access, wholesale-only, passive fibre network infrastructure.




• A new Crown-owned investment company (“Crown Fibre Holdings”), which will be operational by October, to carry out the government’s partner selection process and manage the government’s investment in fibre networks.




• Crown Fibre Holdings and each partner establishing a commercial vehicle, a “Local Fibre Company” (LFC), to deploy fibre network infrastructure and provide access to dark fibre products and, optionally, certain active wholesale Layer 2 services.




• Provision for national and regionally-focused proposals, as well as consortium and proposals aggregating any combination of LFC regions.




• Independence, equivalence and transparency requirements for LFCs.




• Expansion to 33 candidate coverage areas based on the largest urban areas (by population in 2021).

What is really good is the commitment to open access to dark fibre, and the regional approach to the issue. The Government has held firm to most of their draft proposal, with the main change being an increase in the number of coverage areas to 33.

Computerworld reports on positive reaction:

“This ushers in the biggest and most fundamental change to telecommunications in New Zealand since the privatisation of Telecom 20 years ago,” TUANZ CEO Ernie Newman said in reaction to the news.

“The paper builds very constructively on the work done previously,” Newman says. “It takes into account most of the key issues raised in submissions, and sets a timetable with milestones. It is an excellent blueprint on which to build.” …

InternetNZ also welcomed the plan, saying it is “delighted” with today’s announcement of a regionally-based approach to investment.

“This is a world-leading programme that can be expected to deliver the infrastructure New Zealand needs,” spokesperson Jordan Carter says.

“Steven Joyce and the Government have put in place a framework that over time can deliver a widespread fibre rollout across urban New Zealand.”

Those unsure about the benefits of ultra-fast broadband, might want to read the guest post from Rod Drury earlier this week.

Chris Keall (and Kelly Gregor) at NBR cover the proposal in detail. Keall highlights a new focus:

In the proposal document released today, the minister also flags that “The capacity and reliability of New Zealand’s international data connectivity will become increasingly important as LFCs’ [local fibre companies'] networks are deployed over the course of the UFB Initiative.”

The Commerce Commission recently identified slow international data as a roadblock to better domestic broadband performance, with testings showing that overseas pages take twice as long to load as those hosted locally – even with our current copper-dominated networks.

International bandwidth and data costs are often cited as a big issue also.

In a fit of good timing, Juha Saarinen has an article in Computeworld on dark fibre, and how you basically can not get it from Telecom or TelstraClear. Have a look at this price comparison and weep:

James Watts, who runs Palmerston North-based ISP Inspire Net, says the reason dark fibre is attractive to his customers is because they can “do whatever the hell they want with it.” Inspire currently charges $595 and $995 for intra-town dark fibre pair leases, depending on contract terms, and double that for inter-town unlit circuits.

To light the circuits, Watts says his company sells Gigabit Ethernet transceivers for $140 each.

A similar 1Gbit/s circuit from Telecom apparently costs $7000 a month, plus installation charges.It’s $69k a year according to Telecom’s pricing book.

Finally a focus on the issue of fibre providers being discouraged from also operating retail telecommunication services, both here and in Australia. Steven Joyce said in a Q&A:

Will Telecom have to structurally separate its network business to participate?

Any such decisions are up to Telecom.  The Government has made it clear that it will only invest money into fibre companies that are not controlled by shareholders who also operate retail telecommunication businesses.  The Government is also clear that potential partners who already own fibre assets can table options that involve those fibre assets being vended into any new fibre companies.

Preventing vertically integrated monopolies is crucial. This basically means Telecom can not be a majority shareholder in any regional fibre company unless they structurally separate (ie sell off Chorus). They can have a minority stake however.

In Australia, the Government has done similiar:

The government could also deny Telstra access to new spectrum for advanced wireless broadband unless the telco sells off its cable network and 50 per cent stake in Foxtel (25 per cent owned by News Corporation, owner of The Australian)

If you want to be part of the future, you need to be separated.

For those who think separation is not a big issue, think what it would be like if Air New Zealand owned the airports and could set access terms for other airlines. Or if Ford owned the roads and set the rules for what other cars could drive on them, and for how much.

So as I said, very pleased with the announcements today, and now working my way through the details.

The Herald reports:

Telecommunications engineers continued their strike against a division of Telecom yesterday as the Council of Trade Unions (CTU) called on the Government to halt negotiations over broadband with the company.

I’m not exactly what you call a cheerleader for Telecom, and I’m not saying who has the better case in this dispute with the EPMU and engineers. But I am firmly against any suggestion the Government intervenes in the dispute by trying to heavy Telecom re broadband.

The Government should make decisions around the fibre to the home project purely on what will achieve the best result. Now personally I think lines companies have a lot to offer as well as telcos, but I want it decided on best return for investment – not intervening in an industrial dispute.

One of the reasons I am not a Labour fan, is the parliamentary wing’s role as lobbyists for their union supporters.

The unions have institutional membership and voting rights within Labour. You don’t see individual businesses let alone employer groups joining National and being able to block vote at National conferences and delegate selections.

Of course National tend to be more employer friendly, but it is very very rare in the case of a private sector industrial dispute that National will actually take sides. National rightly tends to think that is a matter for the employer and union to resolve.

But over on Red Alert we have seen a huge number of posts on behalf of the EPMU over the dispute between a Telecom subsidiary and the EPMU and affected contractors/employees. The fact the EPMU National Secretary is also Labour Party President of course mudies the water considerably.

We’ve had more posts on Red Alert on this industrial dispute than almost any other issue. Forget the global recession. A post on 3 August calling for Steven Joyce to do something was followed up on by a post on 20 August calling for the PM of all people to get involved and then again on 21 August and also on 24 August.

Labour have also asked two oral questions on this. They have the right to do so, but could you imagine the outrage if National MPs were getting up in the House urging action on behalf of (say) Carter Holt Harvey in an industrial dispute.

I prefer political parties to focus on laws and policies, not to be taking sides in industrial disputes unless it reaches critical levels such as a nationwide strike.

The Herald reports:

Telecom is to offer an uncapped broadband internet deal but customers will have to trade off connection speed.

From next week a new $60 a month “all you can eat” plan will be offered with the compromise that downloads may be slower at peak times. …

Brayham said during peak hours – generally 3pm to 10pm – internet traffic “shaping” would target files consuming large amounts of bandwidth, which could include some music, movie and software downloads.

I think this is a great move. NZ is the only OECD country with no non data capped plans – finally we have one.

I have no problem with data capped customers getting priority speeds during peak times. File sharers often download overnight and are generally more worried about the data cap, not the speed – so long as it is reasonable.

Of course we have to see exactly how fast things go during both off peak and peak times, but if the service holds up Telecom could do well with this offering.

I am puzzled as to why this is a story:

A Horowhenua farming couple are outraged that Telecom is paying them a pittance to lease land for a transmission tower.

Wendy and Mark Rolston say instead of the meagre $199.36 a year they are getting, they should be paid around $10,000.

Sites usually net landowners at least $5000 a year, telco experts say.

At first you do wonder about it.

The farm’s previous owner struck the lease on January 12, 1988 for just $150.

That edged its way up with inflation over the years to a princely $180.11 by late last year and the lease came up for renewal in January this year for a further 21-year term.

Okay so they brought the farm knowing what the lease was worth up until 2009.

Via David Shaw of DTZ property consultants in Wellington, Telecom initially extended an offer to increase payments from $180.11 to $3000.

“My client Telecom New Zealand is prepared to offer you a revised rental of $3000 plus GST per annum for the microwave site on your property at Arapaepae,” he offered the Rolstons on January 23.

The couple wrote back, rejecting that and seeking $10,000.

Shaw in turn wrote back last month withdrawing the $3000 offer because Telecom had decided to stick to the original $199.36.

Now here is what I don’t get. The 21 year lease has expired. This means they can now kick the transmitter off the farm in the absence of a new agreement. So just do so if you don’t think Telecom will pay you enough.

I can’t see what Telecom has done wrong here.

Over at the ffunnell site, you can ask questions about Telecom’s new XT Mobile Network. Just ask away, and you should get a response straight away.

ffunnell is something you may hear more of. It is the online media advertising network for some of the larger independent online publishers. They include:

• Scoop
• Geekzone
• Kiwiblog
• Public Address
• Throng
• Pundit
• Kimberley Crossman

There will be more details on this over time for interested advertisers. The network has an audience of 1.3 million unique browsers a month and 1 million page views a week.

Very pleased to see an agreement between the teclos. Vodafone says:

Vodafone and Telecom NZ have worked together over the last 48 hours to reach a solution to resolve the issues between them, which have been identified by both parties.

This agreement has been reached by both parties, to achieve the best outcome for their customers, the telecommunications industry and all New Zealanders.

Telecom has agreed to extend its network filter installation programme, in order to help resolve the interference issues identified as impacting Vodafone mobile customers.

Vodafone has agreed to discontinue its injunction proceedings. Telecom’s new XT mobile network will go live for New Zealanders by the end of May 2009.

I have not followed the court case, but the fact Vodafone has withdrew suggests they were unlikely to win.

UPDATE: A spokesperson for Vodafone tells me that they withdrew the court proceedings because Telecom agreed to everything they asked for.

Very disappointing to see that Vodafone has laucnhed legal proceedings against Telecom’s new mobile network, on the grounds of signal interference.

This is gut instinct, but I am suspicious that this is more about knocking Telecom’s marketing schedule off balance, than the only resort left to Vodafone. There may well be technical issues, but was litigation really necessary just 11 days from Telecom’s launch?

We’ll know more once documents are filed and made public. For now I am sceptical, and hope that it is not a sign of Vodafone behaving like an incumbent bully. As I said, there is not enough information public at this stage to know who is right or not.

Telecom has released today their proposal to the Government for how best to utilise the $1.5b available for fibre to the premises.

Their first option is an acclerated fibre roll-out by Chorus. Milestones would be:

1. All 93 hospitals connected within 30 months
2. 2,000 schools connected within 30 months
3. Remaining 600 schools (including those outside the 75% zone) within 36 months
4. Possible extensions to medical centres, pharmacies, libraries, maraes and community centres
5. Would build fibre to all new homes in the 75% coverage area (at present only builds to developments of at least 50 lots)
6. Extend the fibre network to pass more homes, and subsidise connections into individual homes.
7. Have shorter cooper loops to increase speeds to non fibre homes on VDSL2

It would see the Government investment and their existing investment co-ordinated (not competing) so there is no over-build. All infrastructure would be open access and dark fibre would be made available to all comers.

It is not promising full fibre into every home, but it is advancing a lot towards that goal.

Their second option is to have the Crown Fibre Network Company to contract Chorus to build a national fibre ducting network of up to 10,000 kms home. So they will not provide the fibre, but will provide the duct for it. Now ducting is estimated to be 80% to 85% of the cost of fibre deployment (off memory) and a lot of people say that it is only the ducting that needs to be open access.

Service providers would fund the actual fibre connection to the premises.

Telecom also offer some hints that they could be willing to sell off some or all of Chorus (which would make their proposal extremely attractive). They say they are open to “alternative partnership models”.

Really pleased to see Telecom put forward constructive and viable proposals. It will be fascinating to see who else steps up to the plate.

The Herald reports:

Telecom’s Xtra has been fined $45,000 and ordered to pay $10,000 in costs for breaching the Fair Trading Act by lying to its customers.

Xtra, New Zealand’s largest internet service provider, was convicted in the High Court in Wellington today on three charges of misrepresenting “that its pricing, conditions attached to its services or its billing systems had been approved by the Commerce Commission.”

To be fair to Xtra, it was undisciplined call centre staff at fault, rather than a deliberate strategy of Telecom’s to claim something that did not exist. But as it happened on three occasions, that was enough to get pinged.

The judgement is online, and there are some interesting parts to it. The lawyer for Telecom suggested one witness was unreliable as her history of perceived bad service from Telecom might have influenced her recollection. Judge Broadmore responded:

I add that it is somehing of a low blow on Mr Heron’s part first to elicit from Ms Temple that she had had a number of contacts with the Telecom help desk which had caused her frustration for various reasons including notably the lengthy delays awaiting connection to a representative; and then to invoke that frustration, engendered by Telecom’s own conduct to impeach her credibility.

Ouch – a bit of a spanking there.

The NZ Herald has an exclusive preview of a report being released at 10 am today, that was commissioned by Telecom, Telstra-Clear and Vodafone.

As readers will know, National was elected on a major promise of spending $1.5 billion to help ensure ultra high speed broadband to 75% of NZ homes.

The three telcos have released a report which basically says the Government should not spend $1.5 billion in this area, because all their existing offerings are adequate. I’ll try not to laugh.

Now you have to consider how unusual it is for the major players in a sector to try and stop the Government spending $1.5 billion in subsidies, rather than try and get some of the $1.5 billion.

So why would the big three be fighting against a huge investment in their sector? Because they are scared shitless that it won’t go to them. They are very worried that electricity lines companies may get to provide most of the infrastructure for fibre to the home. And this means the telcos would have to compete in offering services over that fibre network, plus offer complementary services over mobile and wireless.

Labour have been running what is basically a blatant lie for nine months, about National’s policy. They have been scare mongering that National is just going to give the $1.5 billion to Telecom, which would help perpetuate Telecom’s market dominance. Now ask yourself, would Telecom be partnering up with its two biggest rivals, to fund a report that argues the $1.5 billion should not happen – if Telecom thought there was any liklihood that $1.5 billion would be coming their way?

Now I don’t know what the Government is going to do. I’m not even sure if they have made decisions yet. But I think Liam Dann has it somewhat wrong in this article:

Bill English and John Key will already be having serious doubts about their ability to commit $1.5 billion.

The world has changed dramatically since Maurice Williamson – then opposition spokesman on telecommunications – made the $1.5 billion promise.

It was John Key, not Maurice Williamson, that made the promise. I was there at the speech. John was taking, and Maurice was sitting next to me clapping furiously – like all of us. Now this is not to say that Maurice was not a passionate advocate of the policy – he was, and he helped make it happen. But anyone who suggests John Key is not committed to this policy is wrong (in my opinion). It is no secret that John was a very strong advocate for it.

And while the credit crisis is an issue, the Government has made clear that they are looking to bring forward infrastructure spending, not reduce it.

Dann says the benefits of fibre to the home must be jobs, not just movies on demand. I agree. I think fibre to the home will allow many businesses to reduce costs as staff can work from home, which provides both economic and environmental costs. Dann says:

And cost-benefit debate needs to focus on jobs not, unfortunately, speed for the home user.

Last month a report by the Economist noted two studies which found some evidence of increased broadband spending equating to increased employment.

Washington-based Brookings Institution concluded that for every percentage point increase of broadband penetration, employment increases by 0.2 per cent to 0.3 per cent per year. But that is not huge growth.

Not huge? So if we get 10% more broadband penetration we will have extra employment growth of 2% to 3% a year. That is an extra 40,000 to 60,000 jobs a year.

I look forward to reading the full report. There certainly are difficult issues for the Government to deal with. For example if most of the funding does go to electricity lines companies, it would be desirable for this not to hinder current investment plans by the Telcos. I am sure the Castalia report will be a useful piece of research, as they had access to the telco’s commercial data.

Chris Barton looks at the Government’s fibre plans:

We do know fibre-optic cable is at the centre of Joyce’s rewiring plan and the mechanism to get there is the much-vaunted public-private partnership.

So far so good. But just who does Joyce plan to partner with? And will he be seduced by Telecom’s wiles?

There’s no doubt Telecom would love to bed Joyce. Such a tryst – Telecom building, operating and no doubt, wanting to own, the new wires – would secure the firm’s monopoly dynasty forever.

I think Mr Barton needs to take less Viagra before he writes his column

But it’s also clear such a dalliance would be a terrible mistake. Not to mention a betrayal of voter trust and a very poor return on taxpayers’ money.

And getting the maximum return on the Government’s investment is crucial.

If Joyce is still uncertain about what to do, he should re-read the very fine piece of analysis prepared for Internet New Zealand by Network Strategies. There, in glorious return on investment detail, is a simple answer to who the Government should partner with instead of Telecom – electricity lines companies.

Why? Because if New Zealand wants to rewire its aged telecommunications to a fibre-optic future, the electricity lines companies are the cheapest, most efficient way to do it.
Plenty of power poles and ducting are already going by our homes, already with resource consent, making it much easier to string or trench fibre to our doorsteps. How much cheaper? Without the lines companies, Network Strategies estimates a fibre network will cost $5 billion.

With the lines companies on board, the cost drops to $3 billion – making the Government’s $1.5 billion investment look like a very realistic sum to fulfil its election promise.

A $2 billion difference is far from insignificant. I am of course on the Board of Internet New Zealand, but we were as surprised as anyone I think that the research turned up such a massive price difference.

There are other reasons why this is very good idea. Most of the 27 lines companies in New Zealand are owned by consumer trusts – an ownership structure that tends to be sympathetic to longer payback periods and fits well with local initiatives that recognise the importance of broadband to a region’s economic and social wellbeing. And some, such as Vector and Counties Power, are already providing fibre to homes or businesses.

And even more importantly, lines companies do not tend to be in the business of providing services over their lines – they are an access provide rather than a service provider. This is actually crucial as you then avoid a vertically integrated monopoly, and then multiple service providers can comptere and offer different packages over the fibre.

But there are two problems. The first is what such a network would do to Telecom’s share price. There’s no doubt it would have an unsettling effect. But if the new wires are “open access”, it’s hard to see how Telecom can complain too much.

Open access means companies get equal access to the infrastructure on non-discriminatory terms and conditions, so all comers are offered the same wholesale products or services at the same price and equivalent conditions. In other words, consumers get choice and Telecom competes for business with everyone else, probably getting a whole lot more efficient in the process.

The impact on Telecom is a real issue – not just in terms of share price, but also their fibre to the cabinet plans. Would they continue? Would they sell Chorus if the line companies get the nod to build the fibre to the home network? Could there be a win-win – maybe some partnership with lines companies and Telecom/Chorus? So many issues, which is why a decision should not be rushed.

I’m not picking on Telecom, but their press release this morning is a good example of “spin” which was the oppsoite of Vodafone’s refeshingly clear “We stuffed up, you hate the change” release I highlighted.

I got a tip off last night that the staff in the broadband helpdesk were all notified of a meeting at 8.30 am this morning. They were even told that they would be paid if they were not rostered on, to attend the meeting. This suggested that it was to be a meeting to announce redundancies as their helpdesk would be trasnferred to the Philipines.

So when I saw the press release this morning headlined “Telecom to retain its largest contact centre in NZ following extensive trials”, I thought maybe I had guessed wrong. It sounds like good news.

But no, if you go all the way down to paragraph ten, you get the details that the broadband helpdesk is indeed moving to Manila.

Now, I am not criticising the decison per se. Its awful for the affected employees who have my sympathy. But it seems the offshore call centre was getting higher satisfaction ratings than the NZ one. If you are getting better quality, and for lower cost, then it is an almost inevitable decision.

My criticism is just not being upfront in the press release at the beginning. Trying to sugarcoat the 250 job losses in NZ, by proclaiming all the jobs you are not moving offshore is not helpful. Did you think the media would be fooled and not mention the job losses because they were not in the headline? Look at the Dom Post headline.

The Herald reports on Telecom’s announcement that it will roll out VDSL2 to it cabinets.

If you live within a km of a cabinet in theory you can get 50 Mb/s download speed and 20 Mb/s upload. In reality it will be less than this due to congestion on the backhaul.

It’s good to see Telecom making this available.  The price details will be interesting, once known.

The Line reports that Telecom has killed Ferrit:

Three years ago, Telecom threw its money into the online retail venture Ferrit, today, Telecom has decided to throw it out. …

Telecom retail CEO Alan Gourdie … in a press release, saying that the company is focused on mobile, broadband and ICT and that Ferrit falls outside the company’s core service focus.

I can’t say I am terribly surprised. It didn’t provide people with enough of an incentive to shop there, rather than elsewhere.