Interesting reading............
Open Letter To Minister of Communications David Cunliffe
Annette Presley, Co-Founder Slingshot and CallPlus
I would like to personally register my concern regarding the Telecom's letter of the 5th of May that was recently made public, the key points of which I have set out below and commented on.
Our concern is that this letter clearly points to an activity that goes far beyond what we would consider routine lobbying given the extent of influence being exerted behind closed doors.
The smaller carriers and internet service providers, such as ourselves, simply don't have the resources or think it appropriate to engage in this level of influence. We have relied on the transparency of the process that the telecommunications minister has been at considerable pains to outline and achieve. It comes as a great shock to us that in fact Telecom is not only aware of, but is also deeply entrenched and part of the entire decision-forming process. Telecom's letter makes this quite clear in a number of places.
This situation makes a mockery of the whole process that should enable a robust argument on both sides to be debated and a conclusion made for the good of New Zealand. Suddenly it has become clear how so many confusing decisions and reversals of positions have come about over the past couple of years.
Many of the points Telecom made in their letter cannot stand up to scrutiny. I would sincerely hope that these were discounted, although when you look at their four point summary at the end of their letter setting out what the government should do, it would appear that it was followed point by point.
We would like to draw your attention to the following claims Telecom made in their letter which are misleading:
1. The target of 250,000 connections they offered was a soft one and has not had the effect Telecom promised of seeing "New Zealand considerably lift its stakes in the international table, probably passing Australia, for instance in broadband uptake". This assertion simply beggars belief, and when you consider that Telecom is an active participant in the Australian market and well aware of the superior progress being made there, we think that this comment goes beyond simply being misleading.
* New Zealand's international ranking has remained unchanged, near the bottom of the OECD ranking at 22nd out of 30 countries.
* Other countries are adding broadband users at a faster pace. The gap with Australia has widened with Australia improving its rankings with 10.9% of the population using broadband compared to a mere 6.9% in New Zealand
* New Zealand has some of the slowest broadband in the OECD, driven by Telecoms retail pricing and an ineffective wholesale regime. The majority of New Zealand's broadband users operate at speeds of 256k or less. These speeds are barely at a level that would be considered broadband in other countries making our performance even more concerning.
* Telecom will fall well short of the 83,000 target for connections from wholesalers with only 47,000 connections through competitors at the end of September 2005.
2. Telecom's claim that their proposal would "definitely put New Zealand on a par with what is effectively being offered in Australia" is totally incorrect. In fact the reverse has happened.
* Australia has implemented unbundling of the Local Loop, and provides an excellent example of how competition can encourage investment with competitors investing in their own DSLAM's and Telstra being forced to follow.
* In Australia ADSL2 and ADSL2+ are being offered with speeds of 12Mbps and 24Mbps respectively. In New Zealand speeds are artificially throttled to a maximum of 2Mbps for residential users, and only 128Kbps for upload.
* Australia offers more affordable pricing and much larger data caps.
3. Telecom claim that if the decision was sent back to the commission, then New Zealand would not have broadband until 2007. This statement is both misleading and very concerning.
* A decision to do this would have amplified Telecoms need to maximize their "first to market" advantage and gain as many customers prior to unbundling coming into effect.
* The competitive pressures of other emerging broadband networks in New Zealand meant that they were planning a significant ramp-up of broadband services in any event.
4. Telecom states that "a negative government decision on unbundling could wipe 30% or so from Telecoms share price" and that "more than 20% of the share market is at stake".
* Telecom does represent 20% of the New Zealand share market and as Telecom is 75% overseas owned these profits go offshore.
* Since the government sale of Telecom, more than $8 billion has been remitted overseas to their foreign share holders, and they still have an unrealized capital gain of more than $5 billion.
* One would question why is the government propping up a foreign owned monopoly and supporting its control of the NZ market.
5. Telecoms assertion that a decline in Telecom's share price "which is of course a key component of the Governments superannuation fund" is deeply concerning. The inference is that the concerns of a super fund return should be more important than the future of New Zealand in the knowledge economy.
* It is a complete conflict of interest for the NZ government that they have a vested interest in supporting Telecom's monopoly. The government should consider an appropriate policy to ensure that this conflict of interest is removed.
6. Telecom threatens that if the government does unbundle the local loop (LLU) then it will restrict its investment in its Next Generation Network (NGN).
* Our experience in broadband and our OECD rankings should be a lesson. If the government allows Telecom to continue to determine the pace of investment and the products and services that are offered we will see a repeat of the last five years. The government must act on LLU and create a viable wholesale environment in order that competitive pressures will encourage investment.
* We believe there is ample evidence from other countries that unbundling encourages more rapid investment as the incumbent must ensure its network remains at least on a par with its competitors
We cannot go on in this environment where we have one company running New Zealand Telecommunications.... When will this change? If the CEO of Telecom can write this blatantly misleading letter to the NZ government telling them what to do and how to do it - to the detriment of New Zealand and to the benefit of themselves - then what are we really saying about our government?
You have some critical decisions to make in the forthcoming months including:-
* The consequences of Telecom not achieving its wholesale broadband target.
* The regulation of mobile termination rates.
* The final determination on regulated unbundled bitstream.
We await to see the outcome of these as well as the governments recognition of the importance of telecommunications to the economy.
We await to see a willingness to reconsider and act quickly on local loop unbundling.
We await to see a consideration of the separation of Telecom along similar lines to Telstra in Australia and BT in the UK. We have lost two years as a result of the local loop unbundling decision; we can not afford to lose another two years.
Yours Sincerely,
Annette Presley
Co-Founder Slingshot and CallPlus
Open Letter To Minister of Communications David Cunliffe
Annette Presley, Co-Founder Slingshot and CallPlus
I would like to personally register my concern regarding the Telecom's letter of the 5th of May that was recently made public, the key points of which I have set out below and commented on.
Our concern is that this letter clearly points to an activity that goes far beyond what we would consider routine lobbying given the extent of influence being exerted behind closed doors.
The smaller carriers and internet service providers, such as ourselves, simply don't have the resources or think it appropriate to engage in this level of influence. We have relied on the transparency of the process that the telecommunications minister has been at considerable pains to outline and achieve. It comes as a great shock to us that in fact Telecom is not only aware of, but is also deeply entrenched and part of the entire decision-forming process. Telecom's letter makes this quite clear in a number of places.
This situation makes a mockery of the whole process that should enable a robust argument on both sides to be debated and a conclusion made for the good of New Zealand. Suddenly it has become clear how so many confusing decisions and reversals of positions have come about over the past couple of years.
Many of the points Telecom made in their letter cannot stand up to scrutiny. I would sincerely hope that these were discounted, although when you look at their four point summary at the end of their letter setting out what the government should do, it would appear that it was followed point by point.
We would like to draw your attention to the following claims Telecom made in their letter which are misleading:
1. The target of 250,000 connections they offered was a soft one and has not had the effect Telecom promised of seeing "New Zealand considerably lift its stakes in the international table, probably passing Australia, for instance in broadband uptake". This assertion simply beggars belief, and when you consider that Telecom is an active participant in the Australian market and well aware of the superior progress being made there, we think that this comment goes beyond simply being misleading.
* New Zealand's international ranking has remained unchanged, near the bottom of the OECD ranking at 22nd out of 30 countries.
* Other countries are adding broadband users at a faster pace. The gap with Australia has widened with Australia improving its rankings with 10.9% of the population using broadband compared to a mere 6.9% in New Zealand
* New Zealand has some of the slowest broadband in the OECD, driven by Telecoms retail pricing and an ineffective wholesale regime. The majority of New Zealand's broadband users operate at speeds of 256k or less. These speeds are barely at a level that would be considered broadband in other countries making our performance even more concerning.
* Telecom will fall well short of the 83,000 target for connections from wholesalers with only 47,000 connections through competitors at the end of September 2005.
2. Telecom's claim that their proposal would "definitely put New Zealand on a par with what is effectively being offered in Australia" is totally incorrect. In fact the reverse has happened.
* Australia has implemented unbundling of the Local Loop, and provides an excellent example of how competition can encourage investment with competitors investing in their own DSLAM's and Telstra being forced to follow.
* In Australia ADSL2 and ADSL2+ are being offered with speeds of 12Mbps and 24Mbps respectively. In New Zealand speeds are artificially throttled to a maximum of 2Mbps for residential users, and only 128Kbps for upload.
* Australia offers more affordable pricing and much larger data caps.
3. Telecom claim that if the decision was sent back to the commission, then New Zealand would not have broadband until 2007. This statement is both misleading and very concerning.
* A decision to do this would have amplified Telecoms need to maximize their "first to market" advantage and gain as many customers prior to unbundling coming into effect.
* The competitive pressures of other emerging broadband networks in New Zealand meant that they were planning a significant ramp-up of broadband services in any event.
4. Telecom states that "a negative government decision on unbundling could wipe 30% or so from Telecoms share price" and that "more than 20% of the share market is at stake".
* Telecom does represent 20% of the New Zealand share market and as Telecom is 75% overseas owned these profits go offshore.
* Since the government sale of Telecom, more than $8 billion has been remitted overseas to their foreign share holders, and they still have an unrealized capital gain of more than $5 billion.
* One would question why is the government propping up a foreign owned monopoly and supporting its control of the NZ market.
5. Telecoms assertion that a decline in Telecom's share price "which is of course a key component of the Governments superannuation fund" is deeply concerning. The inference is that the concerns of a super fund return should be more important than the future of New Zealand in the knowledge economy.
* It is a complete conflict of interest for the NZ government that they have a vested interest in supporting Telecom's monopoly. The government should consider an appropriate policy to ensure that this conflict of interest is removed.
6. Telecom threatens that if the government does unbundle the local loop (LLU) then it will restrict its investment in its Next Generation Network (NGN).
* Our experience in broadband and our OECD rankings should be a lesson. If the government allows Telecom to continue to determine the pace of investment and the products and services that are offered we will see a repeat of the last five years. The government must act on LLU and create a viable wholesale environment in order that competitive pressures will encourage investment.
* We believe there is ample evidence from other countries that unbundling encourages more rapid investment as the incumbent must ensure its network remains at least on a par with its competitors
We cannot go on in this environment where we have one company running New Zealand Telecommunications.... When will this change? If the CEO of Telecom can write this blatantly misleading letter to the NZ government telling them what to do and how to do it - to the detriment of New Zealand and to the benefit of themselves - then what are we really saying about our government?
You have some critical decisions to make in the forthcoming months including:-
* The consequences of Telecom not achieving its wholesale broadband target.
* The regulation of mobile termination rates.
* The final determination on regulated unbundled bitstream.
We await to see the outcome of these as well as the governments recognition of the importance of telecommunications to the economy.
We await to see a willingness to reconsider and act quickly on local loop unbundling.
We await to see a consideration of the separation of Telecom along similar lines to Telstra in Australia and BT in the UK. We have lost two years as a result of the local loop unbundling decision; we can not afford to lose another two years.
Yours Sincerely,
Annette Presley
Co-Founder Slingshot and CallPlus
