ISPANZ demands retail parity

ISPANZ demands retail parity, and consultation on NGN

Press release
For immediate release
15 September, 2006-09-15

The Internet Service Providers Association of New Zealand (ISPANZ) made its submission to the Finance and Expenditure Select Committee on Wednesday evening on the subject of the Telecommunications Amendment Bill.

The organisation brought to the fore two very significant issues for the industry in respect to retail parity and Telecom's NGN plans, and gave proposed solutions involving strong operational separation of Telecom and competition notices.

Key points from the presentation are:

* Telecom has a long way to go in treating its wholesale customers the same as its own retail arm. Operational separation of the network is required, with the threat of further separation.

* Telecom is not providing the details of its NGN plans, where in the UK, British Telecom is required to consult with industry.

* The NGN could be used to replace regulated services with better services that only Telecom retail have access to.

 Our general competition law is too slow and expensive for the telecommunications sector. New Zealand needs sector-specific competition law with stiff time-based penalties, including Competition Notices as used in Australia.

Presenters’ speaking notes follow below.

ISPANZ presentation to the Finance and Expenditure Select Committee on the Telecommunications Amendment Bill

14 September 2006

[David Diprose, President]
ISPANZ introduction

ISPANZ was formed just one year ago in response to how bad the New Zealand broadband situation had become. Speeds were slow, prices high and wholesaling was a real challenge.

We now have over 30 members from the larger 2nd tier operators to the smaller niche players.

You won’t be surprised to hear that we strongly support the bill, given that we came into existence to campaign for these changes. But there are a couple of areas that need strengthening.

The ISPANZ written submission was brief because we worked closely with InternetNZ & endorsed their detailed submission.

This evening I want to explain two problems we face and outline two solutions.

First problem – Telecom retail parity

Telecom says they’ve “got it” and are changing. As their wholesale customers, we say they’ve still got a long way to go. There are many examples of this lack of parity we experience regularly. But I’d like to focus on UBS broadband backhaul.

Backhaul is the linking from the DSLAM that provides the broadband service at the Telecom exchange, through to the handover to the ISP. Today Telecom provides backhaul to their retail ISP Xtra very differently to wholesale UBS backhaul.

Consequently our customers can experience congestion (the service slowing down in busy times) as well as outages that Xtra customers don’t experience.

As well as this, we would love Telecom to provide this backhaul over Ethernet, as they do for Xtra. But instead they demand we invest significantly in outdated ATM equipment to interconnect with their legacy technology.

This costs us dearly in terms of both capex monthly rental to Telecom and should not be necessary.

Second problem – Telecom’s NGN

This is a top secret subject that Telecom is still refusing to talk about. In the UK British Telecom is required to consult with the industry about their NGN design. But without this requirement in NZ the NGN could be used as a means to severely damage competition.

If Telecom is only required to provide wholesale or unbundled access to certain designated services, then the NGN can be used to replace these services with better services that they keep for retail only.

As they roll out their NGN, Telecom will likely be replacing exchanges through both centralised switching & decentralised street cabinets.

Fortunately their delays implementing their NGN give an opportunity to set things right. If Telecom ARE genuine about growing their wholesale business, then they will start talking to us right now about their NGN plans.

We need industry consultation to ensure the LLU opportunity remains viable. Telecom’s copper centres in exchange buildings will still remain with their NGN exchange consolidation & they must remain available for LLU.

We need consultation on emerging technologies to ensure the viability of ongoing competition

There are two key solutions:

First solution – Operational Separation

We don't just need accounting separation.

The Government must have the power to mandate separation without further legislation. The threat of further separation must remain.

As you’ve already heard from InternetNZ, Telecom’s proposal is very different to the BT separation. It doesn’t deal with the network. It is critical that wholesale own the network that provides service to both retail & wholesale customers.

This is the only way to achieve full Equivalence Of Inputs between wholesale customers like us, and Telecom retail. As well we need all wholesale staff incented on wholesale performance only, short and long term.

Second solution – Competition Notices
[Michael Wigley, Lawyer, presented this section]

NZ needs sector-specific competition law like our Australian neighbours have. The Telecommunications Commissioner must be able to deal rapidly with anti-competitive behaviour, through competition notices like the ACCC. A key weapon in his arsenal must be stiff time-based penalties to encourage rapid resolution of any complaint.

Our general competition law (the Commerce Act) doesn’t work for the telecommunications industry. It’s too slow, too expensive, and unsuitable for the telecommunications sector. Consequently it doesn’t play a role anywhere near as much as it should.

Australia had the same problem. So they introduced sector-specific competition law to deal with problems such as anti-competitive bundling, pricing, etc.

They also introduced competition notices. These allow the regulator (ACCC) to give notice to a carrier such as Telstra where it thinks that the carrier is breaching the Act.

If the behaviour continues, and a formal hearing confirms there was a breach, the carriers face penalties of up to A$21M for the first 3 weeks, and A$3M for every day after that. This, combined with the telco-specific competition law, has had strong beneficial impact in Australia. Along with InternetNZ, we believe this would be a highly valuable addition to the Act.

Hopefully the last few minutes have given you a greater understanding of the issues that must be dealt with through our recommended strengthening of the Act.

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