I retired from personal blogging in July 2008.
But you can find me over at http://blog.xero.com.
I think a lot of people might have fallen off their chairs today on Telecom’s announcement.
TELECOM TO TABLE PROPOSAL TO ACHIEVE REGULATORY OBJECTIVES
Telecom’s proposal includes a structurally separated access network company that would have the ability to earn a commercial rate of return
And in a paper to MED Telecom says …
The Netco does not need to be owned by Telecom. It could be sold outright or could be folded into a partnership with industry participants and/or the Government.
Why are they doing this?
Because it is completely logical.
- The model that MED is suggesting is very expensive for Telecom. They have modelled it internally and are very aware of the costs.
- The model is resource intensive. Telecom, like all New Zealand tech companies, cannot attract enough good resources. This really is a major issue.
- The way the model is evolving is becoming the worst of all worlds for Telecom and possibly the industry.
- Telecom are realizing that there is not a sufficient business case for them to provide the network. New Zealand is a long, under populated country.
- They have other big investments to do as well. Perhaps another cellular network.
What has been missing from the debate to date is the investment equation. That is what is now driving the current situation. It is a huge message that Telecom is sending by suggestion voluntary separation and divestment.
This announcement allows Telecom to start having the discussion with Government and the industry. This is a huge olive branch to get the dialog going. What is needed now is that discussion between Telecom, the Industry, the Government and the Opposition. This can be a tide that raises all boats, but certainty is required quickly.
I believe splitting out the network, funding the massive Capex required with long term infrastructure bonds, is the only way that New Zealand can the exploit the opportunity for transformational economic and social change the Internet is providing.
I applaud Telecom. This new style of management and leadership is exciting.
blog
Access Network = copper, not fibre
You noticed my stretch :)
They can sell it to the Government for $1. I think when the books are open it’ll be found that there has been so little investment for so long, that it has nearly 0 value. Look at the rail network. Sold for $1. Investment required to bring it back up to scratch (without expansion). Billions.
Or they can sell it for the market price minus the cost of all the deferred maintenance. This is probably close to $1 anyway!
That’s from Telecom’s document.
i’m with Juha, this is a future oriented approach. The bit that is missing is the who and the how FTTN etc will be funded. I know people love to bang on about how little telecom invests but i don’t see anyone else stomping up billions to fix the issue either…
Some questions:
1: What will happen to the TSO - the tax levied on competitors to pay for the non viable country customers? Will that go to Telecom or to the new network company?
2: Can we please have due dilligence done on the network - I’d like to know where the lines are, what capacity they have and what state they’re in before commiting any money to buying it.
3: Does it include the Next Gen Network kit or is it just the copper to the house? The NGN isn’t a new network, it’s the old one with new bits added on so that had better be included, thanks.
Rod, i would love to share your warm fuzzies over Telecom’s proposal but i can’t. As a monopolistic entity, Telecom should be forced to upgrade the network, otherwise we end up with what happened to the rail system. They make $800 million *profit* per year, they can afford it. Hell, they can afford to borrow to fund it. They might even be able to rehire all those thousands of cable layers they laid off in the ’90s. Or they could stop paying a pittance to the third parties they outsource network maintenance to and get them to do it. Telecom has maximised shareholder returns for the last 10+ years, it is time those shareholders gave something back to the customers they serve.
Shane : As a monopolistic entity, Telecom should be forced to upgrade the network
One would be a monopoly ONLY if there is no one that has guts to stand up and compete. Simple as that. Telstra has the guts to do so, but the market is too small here to invest and get a healthy return.
Here is a question to ponder. Who were the dominant players in web search engines prior to the emergence of Google? There were dominant players in this area before Google appeared on the scene. The point is, you only crown someone with the title of being a monopolist if you don’t want to compete.
They make $800 million *profit* per year, they can afford it.
It is their profit as a result of looking after their PROPERTY and it is none of your business to demand anything from them. It is only mom & dad that you can demand part or all of their properties as you’re entitle to those. Telecom is run with no help from the government, so your tax dollars don’t go to Telecom, it goes to Cullen’s pocket and that is where you should make your protest to.