Summary: The New Zealand Ministry of Economic Development is considering how to seperate Telecom operationally. Comments must be made to the Ministry of Economic Development by 27 April 2007 (see the Ministry Telecom-seperation page)
Monopolies may derive optimal revenue by providing a sub-optimal service. Telecommunication is a core service, and there is a Government responsibility to ensure that a reasonable quality service is delivered. The Government should own the local loop or regulate service delivery levels on the local loop.
No Broadband in Wellington, New Zealand
I live about 12km from the centre of the capital city of New Zealand (about 15km by road). So you could say I live in Wellington city. If there is no traffic, it would take me about 25 minutes to drive to the Beehive. The Beehive is the iconic executive office of NZ parliament (It is called the Beehive because it looks like a natural beehive).
Anyway, this story starts many years ago (about 8 years). I phoned and asked NZ Telecom for broadband in Horokiwi (A kiwi is the NZ icon, and this is a Horo story). Telecom told me that broadband will be available in Horokiwi in about 6 months time. In subsequent years I asked Telecom for broadband every six months. In the first years the answer remained a promise of broadband in six months time. Telecom is not promising anything any more. Over the years, I have tried other solutions. I have not found a viable alternative (I have not pursued satellite, as it is slow and very expensive).
Apparently the local loop into Horokiwi is not broadband (ADSL) capable.
At the moment I have two phone lines and a (dial-up) service provider. These three services cost me more than broadband plus a phone line would cost!
Charging me for two phone lines provides a better revenue stream to Telecom than broadband would.
The infrastructure Telecom provides has frustrated my ability to work from home. As a matter of fact, I have lost revenue as a direct result of the lack of infrastructure(Ive had to give up contracts).
The funny thing is that when go I on-line to check whether Broadband is available on my phone line, the Telecom site says yes, Kris can have broadband if he wants to. So when, from time to time I phone a new wireless service provider, I get the answer” No, we do not provide wireless in your area,- but wait - we can provide ADSL”. The subsequent conversation often raise my hopes again. So over the years I have collected a few free cheap ADSL modems from vendors that initiated the process of providing broadband.
That brings me to the question:
Why have Telecom persisted in listing me as broadband enabled?
There must have been at least a dozen formal queries on my phone number. I suspect Telecom have many phone-lines listed as broadband enabled, when the poor subscribers have no hope of getting broadband.
The answer must be one or more of the following :
Telecom is totally incompetent, and do not have the ability to maintain or correct their database.
Telecom "data" is skewed so that they can provide incorrect statistics to ministerial queries.
Telecom is using this as a method to kneecap their competitors. The competitors spend an inordinate time on subscribing, and then un-subscribing broadband customers – In addition, competitors are spending their money by
flooding certain areas with cheap ADSL modems.
Broadband alternatives in Horokiwi
Demographics
There is no (ADSL) broadband in Horokiwi. There are about 70 to 80 families living in Horokiwi. I have had conversations with most of the households. At least half of the households would buy broadband immediately. Almost ten Horokiwi families already have some solution (mostly wireless, two satellite connections and one 3G mobile connection). The connection speeds of these families are mostly at
slow broadband speeds.
Satellite
You need clear line of sight to the West to utilize satellite (about 15 degrees above the Western horizon). Setup costs are typically over $NZD 500. Satellite broadband generally provides slow speeds (256kb/s). The problem with satellite is latency (delays). Monthly charges are typically $NZD 130.
Mobile (3g)
Most of Horokiwi is 2g enabled,but only a few areas in Horokiwi are 3g enabled. 3g is targeted towards the laptop market. Typical plans are for around $50 per month and are capped to 1 or 2 Gb (There are typically extreme penalties for going over 2Gb). 3g deliver typical download speeds of 256-500 kb/s. Upload speeds are slower.
Wireless
This is the most viable alternative. The map shows areas that may have access to wireless. I suspect that a quarter to a third of Horokiwi residents may be able to utilize wireless.
Wireless coverage in Horokiwi is largely accidental. The transmitter in Woollaston Way targets Johnsonville. Other residents receive coverage when they have line of sight to the transmitter on Somes island.
Wireless achieve speeds of 500kb/s. Plans start around $NZD 50. Installation cost a few hundred dollars or more.
Wireless services have not been reliable in Horokiwi, but the service has improved over time.
Wireless is not the answer as coverage is by accident and not by design. From conversations with service provider staff it seems that that wireless will not expand significantly in hilly Horokiwi (unless by accident)
My submission
Lack of investment
There are always scenarios where it is in the interest of a monopoly to provide a sub-optimum service (See the above example where a consumer pays more for Telecom services where broadband does not exist).
The
Ofcom survey indicated that the British Telecom separation did not result in immediate infrastructure improvements [
see Martin Cave, Six degrees of separation]. This may be an indication that telecommunications providers prefer not to invest in capital improvements. Why are we planning to copy the British Telecom mistakes?
The “consultation document” refer to “Telecommunications Service Obligations” (TSO) for rural customers, but there is no clear indication of what they are or how they will be achieved/enforced. It seems the TSO would form part of the proposed “Access Network Services” (ANS) Unit. It seems that the ANS unit would still be a Telecom “subsidiary”, and as such would remain a monopoly that would not result in improvements in the local loop.
Core assets and the lessons we have learned
Telecommunications is an important strategic asset. It is strategic in the sense that our economic growth depends on it. Essential and non-essential services will increasingly depend on a telecommunications infrastructure as services increasingly extend beyond business services. Telecommunication is replacing the role of traditional mail, and is becoming the medium of interaction with government and regional services. It will also play a role in employment, making it possible
for people that are not mobile to be a part of the workforce, and enabling energy efficient ways of working. Most people agree that we currently lack a sound telecommunications infrastructure. Government should not abdicate responsibility for telecommunications, just as it would not abdicate responsibility for roads and health to multinational corporations. The well-being of New Zealand citizens will increasingly depend on a sound telecommunications infrastructure.
New Zealand have pertinent history that we should learn from. The power industry went through a similar separation. The structural problem in the New Zealand power industry is that electricity transmission remains a natural monopoly (Transpower). The structural problems in the power industry are around transmission infrastructure.
Government obligation
The Government should own the local loop and make the infrastructure available to service providers at cost. We would then have operational and accounting separation in the telecommunications market. The Government have no profit incentive, so the infrastructure pricing can be provided at true cost. This also solves the problem where there is a tendency for telecommunications providers not to invest in capital improvements.
If the Government does not see owning the local loop as palatable, then the Government should regulate the levels of service on the local loop. Everything else is a waste of time, as we will be stuck with an unworkable local loop.