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Posted by Rod in Communications at 10:29 pm on Wednesday, 21 November 2007
It seemed for the past few months that peace had broken out in our local telecommunications industry.
That ended today with Telecom’s announcement of it’s Cabinetisation plans.
Martin Wylie sums up the issues well: Rivals slate Telecom plan for exchanges
And from Ernie: Telecom Wholesale Has a Case to Answer
It appears that:
- Telecom delayed the LLU and then shifts the battle lines
- They have exposed their lack of commitment to open up Exchanges
- The first Cabinets are where the small number of open Exchanges are, revealing how aggressively they spot compete
- The Cabinets themselves are designed to not easily allow other providers in them.
- This strategy was hidden during the unbundling process
- The LLU process may have been manipulated while Telecom has invested in this new strategy.
This looks duplicitous from Telecom and may ultimately backfire.
- This move destroys any goodwill that was in the industry and from Government - central and local. (Local is important as they will need resource consents.)
- That 1.4b number put out last month will be drilled into in detail (they got a free ride on that) and the talk is it looks much more like 200m in net new spend. Honeymoon over Paul Reynolds.
- It looks like Telecom played Communications Minister David Cunliffe like a violin. How will he react? Will this push him over the edge?
Dangerous game for Telecom. Will be interesting to see how this plays out over the next week.
blog
Rod - can you imagine a scenario where TNZ can satisfy both its shareholders and its competitors/the NZ government. Aren’t, to a certain extent at least, the two things mutually exclusive?
I don’t think it’s a problem… Seriously, cabinetisation is nothing new. WE discussed this on Geekzone back in May 2006, and the intention to do it were anounced back in August 2005. The discussion on http://www.geekzone.co.nz/forums.asp?ForumId=39&TopicId=17333 shows links to press releases and documents from back then.
Other players can’t then complain - it was there all the time to everyone to see it coming.
Next I think LLU is not something that will bring investment.
In short companies will always try and carry on using someone else’s network - in New Zealand the only company with enough technology and know how to do it seems to be Telecom New Zealand, so others just cry to the government so they can have access without much investment.
Seriously, slamming some DSLAM on a cabinet is not investment. I would like to see a competing network - wireless perhaps?
TelstraClear provides great service and was blocked from delivering it in Auckland. Can you imagine if the council had not reject TCL plans? We would have a much different broadband landscape now, with some interesting competition.
Instead, some blocked real investment, leaving the path clear for the players to cry foul every time Telecom makes an announcement or put money where their mouth is.
On (4) - Telecom’s position with respect to the Next Generation Networks has been publicly known for a couple of years (of the top of my head). The NGN exchanges can be nothing more than roadside cabinets (similar to the boxes at the base of cell towers) with zero capacity for third party expansion.
It will ultimately backfire on Telecom I believe - if the market is unable to deliver broadband benefits Telecom will remain in the firing line, and I would expect it to become an increasingly contentious election issue.
Two comments
Telecom can and should be able to satisfy its shareholders and its competitors (think customers not competitors). We are long past the point where Telecom will get all the customers. Too much bad feeling and blood on the floor for that. What they now need to decide is how many of their existing customers do they want to hold onto in the long term. This smells more and more of the type of delaying tactics we had under the last regime. Nothing has changed, we have wasted 12 months or more as a country.
On wireless, this is not a serious replacement for serious broadband infrastructure. Latency is too high. It is fine for casual users who need a Wi-Fi connection at a cafe or users in rural areas who will never get the speeds the city will.
I don’t know why (a recent view I have come to given what is not happening) why the government does not take some of the excessive tax surplus and connect the major cities with fibre. Do it at sea around the country, no resource consent needed. Just circle NZ.
The notion that Telecom would play along with the unbundling exercise but focus its real efforts on faster, better offerings is not a new one - I remember it being mooted back in the day as a smart if not inevitable strategy for them to follow.
Isn’t it time to just forget about Telecom and its thereoretical-but-unachievable DSL speeds and try to find a strategy that will actually deliver world-beating broadband at an affordable cost for us all?
I still think that the sort of independent infrastructure you’ve suggested earlier is the way to go, Rod. If the government of the day is unwilling to divert some of the Hon Mr Cullen’s treasure chest to fund such an enterprise, what prospect some industry-wide co-op that takes on the project, contracting appropriate talent to roll it all out and then making the facility available on a cost-plus-minimal-margin basis?
* What might it cost?
* What’s a reasonable contribution to offset businesses’ otherwise escalating telecommunications costs?
* How long might it take?
La-la land or worth exploring?
actually I’m all for cabinetisation - I want one outside my home/office, I;ll pull out a spade and drag some fibre out myself ….
but I also want choice from there on - sure Telecom owns the fibre from there (doesn’t have to be - why isn’t Orcon dropping in cabinets in places that Telecom hasn’t got to yet and charging them?) - I’d even kick in some of the capital for my local cost (if I could then leverage my investment in much the same way I was able to in the early 90s)
Actually I want more that naked DSL - I want naked ATM to the home - then cable TV, etc etc no reason why the cabinet should be out in the street, I want it in my cellar
Back to reality: part of the problem I suspect is that Telecom is cherry picking the places where they (and orcon/ihug/et al) think they can make the most money - we’re watching them fight over the high-margin customers - the rest of us will have to wait - the real problem will be making sure that enough of them get some of that high-margin market so that they stay around and keep competition alive
This strategy was obvious from the moment TCNZ accepted LLU unbundling.
It’s been discussed in a number of forums.
This was the danger lurking behind LLU - be careful what you ask for, in case you get it.
For any wholesale ISP, it’s irrelevant as they will ride the coattails.
For any non-ADSL ISP, it’s mostly irrelevant as the WiMax auction is imminent and there is (just) enough time to build the infrastructure to compete. Martin Wylie should pony up with the $400M and build it rather than just posturing.
Freitas said…
Instead, some blocked real investment…
Dermott said…
Do it at sea around the country, no resource consent needed…
I think that part of the problem that hinders Telecom from investing in infrastructure because of the restrictions imposed by RMA. The following article detailed good reasons of why the RMA must not be reviewed but it should be completely killed.
It’s time to drive a stake through the heart of the RMA - From Property To Poverty!
RMA had kneecapped some major projects in the past and God knows how many that we never head in the news.
another view here from the Wireless and Broadband Forum- http://www.scoop.co.nz/stories/BU0711/S00470.htm
The problem here is not that Telecom didn’t tell us about cabinetisation but that it has aggressively moved to roll it out in the main centres instead of the regional/smaller towns where it should be used.
Yes, the ISPs knew about cabinetisation. We all did. I wrote about it years ago at Computerworld and even warned about Telecom’s move and how it would undermine unbundling. But this is the kinder, new age Telecom who have gone out of their way to tell us how friendly they’ll be. Now, 18 months down the track with unbundling, before we get a single customer on board, they pull the rug out and tell us they’re dismantling the exchanges in the cities first.
Economically, for Telecom, this makes no sense. Telecom won’t be charging customers more. They won’t be offering services to customers they couldn’t offer from an exchange for the most part. Instead, Telecom is ripping out its own investment in ADSL2+ as well as its competitors’ and rebuilding the network where it doesn’t need to. The same money spent on the edges of the network (smaller towns and remote suburbs for example) would increase the reach of the broadband network. Ripping out central Auckland does not.
Telecom has pulled the wool over the eyes of the entire industry for 18 months. We’ve had discussions, we’ve had talks, we’ve had conferences and we’ve been putting equipment in the exchanges and not once has Telecom said “this is all moot because we’re going to rip it all up. You should be concentrating on cabinets instead”. The Commerce Commission is yet to produce the terms and conditions for sub-loop unbundling (which will give us all access to the cabinets) so that’s a two-year headstart for Telecom. Two more years of having one provider, two more years of ISPs complaining about wholesale rates, two more years of getting what you’re given instead of getting what you need.
Paul Brislen
Vodafone External Communications Manager
I don’t think this moves NZ up the international broadband market at all. By the time this is rolled out in 2 years everyone else will have moved on beyond where they are now and many of them are way beyond this now.
The failing of this whole exercise is this - in NZ we do not invest in infrastructure in any area on a consistant and regular basis. Pick any area as an example - roads, rail, broadband, power, water, our national airline which is now world class, but which previous to this was average for 10 years or more.
Unless we break the cycle of only investing once every generation in infrastructure we may as well do nothing.
ADSL2 is yesterdays technology or it will be when any numbers get it here in NZ.
If NZ wants to compete against the rest of the world we need infrastructure that is close to what they have.
Answers please, (Rhetorical question?)
In Telecom’s UCLL brochure, section on Geographic Availability, it says:
“Note the UCLL service is not available on copper local loops that
terminate on active cabinets.”
1. What does this mean in practice, wrt the MPF (wires!) in our
streetside cabinets ?
2. What defined facility (if any) is available to provide shared
services DIRECTLY to the copper subloop, eg RF backhaul to either a
“fibered cabinet” (multiplexed fibre or ethernet interface?) or
especially an unfibered cabinet (with no Telecom fibre backhaul to the
local exchange). I’m thinking of the Pt Chevalier to exchange DSL
distance quality issues…
3. What’s the status of the RMA process for Street Cabinet access ?
Thanks
David Lawton
“Telecom played Communications Minister David Cunliffe like a violin” ???
You’ve completly missed the context of Telecom’s investment - it will be Cunliffe doing the celebrating.
Go back and read the operational separation determination - Telecom faced the stark choice of investing $300m in meeting EOI standards on legacy assets, OR submitting an investment plan that meets the approval of David Cunliffe.
Telecom is naturally offering to invest $300m in hard assets rather than ‘burning’ $300m to retrofit its legacy services.
It’s a zero sum game - invest in operational separation or invest in FTTN. The Minister has got exactly what he wants!
I’m a Telecom employee - haven’t been across the negotiations with the government or the industry so I cannot comment on the approach taken here with the industry. I am sure that will come out and is worthy of debate.
What I would comment on is this - it is standard practice worldwide in this industry to invest where the customers are and then roll out further as demand increases. In fact that’s probably appropriate in any industry. To suggest that you should invest in the rural areas first is spurious.I haven’t seen any network deployed in the rural areas first - that includes Woosh, Vodafone, Telecom, Telstra Clear.
Paul, you got all right:
“isn’t Orcon dropping in cabinets in places that Telecom hasn’t got to yet and charging them?”
Because other providers don’t want to invest anything. They want someone to risk the investment and they benefit from that.
This is why I think LLU is bad and why those providers should put up with this.
They fought for copper. Now they cry because Telecom is going ahead with other technologies.
The plan were laid three years ago. They should have put this in their strategy so that now they could go directly to fiber instea of being behind - and crying foul.
Exchanges belong to Telecom and as per Property Act, Telecom can do whatever they want with them. yes, other providers want to get access to Telecom’s property, and make money from them. But is this morally right? Because, as someone said already, other providers don’t want to invest anything -contrary to what they say, they dont care one bit about consumer. They want someone to risk the investment and they benefit from that. Sad. If i was them , i would be embarassed.
A phone is an essential public and personal service. Services such as BB really are not essential in relation to your personal well being. Access to the internet from home gives you a quicker way of gaining information, and if you want, conducting transactions.
When you own and pay for a business you do not allow your competitors the luxury of seeing your IP and competing against you.
In essence what is morally wrong with Telecom’s behaviour? I believe there is none.
Submissions on TCNZ’s draft separation plan are due in by 5pm today so expect to see this mentioned.
I too think the competitors should invest more in their own networks, we have Orcon on Fibre at work but we had to commit to them for a two year contract before they (or Vector) would roll out the Fibre the extra 200m to reach us. Fibre is the future - roll it out and leave Telecom in the dust, or at least rolling out right beside you.
As for the Telecom property rights/ morality issue, this is the reason we broke up Telecom, so it would have any reason to act anticompetitvely and therby harm the whole country. If Operational seperation hasn’t worked then we need to take it further and complete the Telecom brakeup. The public good trumps ‘property’ rights as it does for monopolies everywhere. If you (or Telecom) use your property illegally you will lose it.
Daniel said…
…roll it out and leave Telecom in the dust…
Really? Sorry but market forces would come into play here, and that means Telecom is going to up the ante by doing the same or perhaps install a superior fibre system, compared to the competitors.
As for the Telecom property rights/ morality issue, this is the reason we broke up Telecom…
Who’s WE? I didn’t. Did you? I was opposed to the breaking up of Telecom on the grounds that it is a private property (the state doesn’t own Telecom, its shareholders who are private citizens do).
…it would have any reason to act anticompetitive and thereby harm the whole country.
It is within their own rights to do that because it’s their own property. What is yours Daniel is yours and what is mine is mine. Neither you nor I have any rights to what others have and that includes Telecom unless you’re a shareholder, then you have a legitimate say in their own affairs. The law is there in the first place to protect your properties and rights from me (or anyone else) or my properties and rights from you, but it is not there solely to redistribute what is yours to me and others or redistribute what others and I own to you.
If Operational separation hasn’t worked then we need to take it further and complete the Telecom breakup.
Again, who’s WE? You’re talking as if Telecom is your own property (if you’re not a shareholder). If you’re a Telecom shareholder, then the definition of WE you have implied in your message, means yourself and other shareholders. So, any decision to break up Telecom should rest with the owners (you & others) and not the state, me or others who don’t own shares in Telecom.
The public good trumps ‘property’ rights as it does for monopolies everywhere.
No, you’re not entitled to everything that is supposed to be good for the public. You don’t have a right to someone else’s properties or things, if they’re not being offered to be sold to you. If they’re not available to you (on a voluntary basis), you have no right to demand someone who has it to made those properties available to you. See, in Tonga, Samoa, Fiji don’t have broadband as we do here in NZ, but don’t tell me that they have a right to broadband. Do they? They only have a right to buy those services if a supplier offers them (those countries citizens). They don’t have a right to demand the supplier for anything else. These islanders can’t go around screaming and saying that in order for the public good, someone or perhaps their own governments must force someone else’s ( a supplier) to provide those services for them.
If you (or Telecom) use your property illegally you will lose it.
You’re advocating theft here. How about this hypothetical scenario. If I and others (my mates) could come around to your property (home) and examine it to see if we don’t like anything about it. May be #1) its color doesn’t suit my taste or perhaps #2) its architecture pollutes the view of the landscape around the area? If we could find one thing that we don’t like about your home (I am certain that I could find a fault there), then I am going to complain to the state to draft a legislation so that houses like yours must be demolished on those grounds which I have stated in #1) and #2) (may be more). How would feel about my hypothetical proposal here? Do you think that your rights to your own property are going to be violated by someone else’s wishes (assuming that the state is going to enforce it on behalf of that person)? It doesn’t sound nice, does it? Your property is yours and I (and my mates) have no right to dictate to you of what you can or can’t do with it.
Now, here are 2 articles (see link below) about monopolies and you may want to read it carefully, think about it, then comment. If you think, you can rebut the points addressed in both the following articles, then I am keen to hear your view.
#1) Break Up Microsoft?
#2) Drop the Antitrust Case Against Microsoft
“#1) Break Up Microsoft?”
Yep, it worked in the UK where the BT has separated it’s ‘last mile’ business into OpenReach (http://en.wikipedia.org/wiki/Openreach). Every telecom provider now has the same access to the LLU process and can compete with the incumbent telco on a level playing field. As a result, not only has the price of broadband and fixed line voice fallen, but BT are knee deep in modernising their entire back end infrastructure.
The ‘money for old rope’ business plan that Telecom NZ want to maintain is not healthy for the country. Allowing Telecom to prevent competitors from entering the market - the government should be playing hard ball on this one.
zombie said…
Allowing Telecom to prevent competitors from entering the market.
I am sorry, but Telecom doesn’t hold a gun to the foreheads of its competitor’s executives? Telecom simply exercises its rights to what is rightfully theirs, exactly the same as you exercise your rights to what is yours. So, in short, it is Telecom’s competitors that are preventing themselves from entering the market and not Telecom. You could certainly ask Paul Brislen to confirm if Telecom is holding a gun to the heads of Vodafone’s executives, that perhaps stops them (Vodafone) from building their own network? It is more like saying that MYOB is preventing Rod Drury from entering the market for accounting software. Rod definitely knows that he is free to enter the market for accounting software and compete, since no one (I say again, no one) is preventing him from doing so, even the dominant current player (MYOB).
Perhaps the other factor might be the RMA. You could talk to a property developer around the country and they will tell you how frustrating the RMA is. You apply for consents and then you sit and wait, wait, wait (like forever). In one way, this discourages some from even wanting to enter the market (costs & uncertainty of consent application). Waiting for approval costs huge amount of money, and certainly our Telecommunication companies know what’s it like to go thru the RMA process.
zombie said…
Yep, it worked in the UK where the BT has separated it’s ‘last mile’ business into OpenReach (http://en.wikipedia.org/wiki/Openreach). Every telecom provider now has the same access to the LLU process and can compete with the incumbent telco on a level playing field.
You’re not rebutting anything from the articles I have pointed out in my previous message. You’re just restating the current status quo, and that is: we (the society) have a right to fast broadband. Says who? The state perhaps (that is what you’re advocating). The society has rights of what is theirs but have no rights at all to what others have (properties). The state and the general public have rights to what they own , but have no rights to what other private enterprises or citizens have. So, if the state is so concerned about the country’s welfare (be it fast broadband in telecommunication or any other industry), it is they (and its supporters), that must provide those services from its pocket but not to violate others properties in order to fulfill those concerns. The following is a quote from here.
Regarding the Microsoft case, don’t consumers have a right to Windows without Explorer? Does not Microsoft’s bundling of their products (i.e. Microsoft Internet Explorer and Microsoft Windows) into one package disrupt a person’s right to only have to pay for products he wishes to buy?
No one has a right to buy whatever they wish, one only has the right to buy what others choose to sell to them. The terms of any trade must be agreeable to the buyer and the seller, or a sale does not take place. If you don’t like Microsoft’s terms, then you are free to go somewhere else (like I did when I bought an Apple Macintosh and a UNIX server).
There is no right to force Microsoft to create, or sell, a product called “Windows without Explorer” if Microsoft does not want to. The key right in this case is the right to property — which is a legitimate right. The property rights to Windows and Explorer belongs solely to Microsoft and not to potential buyers, and certainly not to the U.S. Department of Justice. That Microsoft does not want to sell the product “Windows without Explorer” does not violate your rights one iota. There is no such thing as your right to Microsoft’s property. There is only the right to buy products that others wish to sell to you. If they don’t wish to sell you them in the first place, then you have no right to buy them.
So, there is no right to force Telecom to give up of what is rightfully theirs so others could help themselves.
zombie said…
As a result, not only has the price of broadband and fixed line voice fallen, but BT are knee deep in modernising their entire back end infrastructure.
The price of broadband would fall if others simply stand up and compete, but hey, some cheerleaders out there do want the state to do it on their behalf, because they simply can’t take the risk themselves. So, who is paying for modernising their (UK) entire back end infrastructure? Is this another state control that requires that they should pay for infrastructure? Now, you’re inferring that Telecom should simply pay for infrastructure because its competitors or the state say so? This is a violation of individual rights.
This is coercion. Don’t you see that it is no different from the mob’s (MAFIA) extortion example quoted in the article I linked to in my previous post (Drop the Antitrust Case Against Microsoft)? The state simply say to Telecom, hey buddy, I want to help myself (including my cheerleaders - ie, Telcom’s competitors) to what is yours and you must comply or else. I call this extortion and no other word to describe it.
I got banned from Geekzone for posting what I am going to post here.
Some have the endless view that it is not ‘Moral’ to pass laws to breach property laws or to force Telecom to act in a decent way because Telecom’s management is charged with making as much money right NOW regardless of the damage done to residential or business customers, the Government etc…
When clearly such can be taken too far, if I started a business the best way to make money would be to lobby the government to allow me to gas everyone and give all their money and belongings to the shareholders.
Strange how the same people arguing that everyone should suffer through this (because ‘that’s capitalism Bitch’) because it isn’t ‘Moral’ due to property laws and yet think that morality doesn’t apply to Telecom and that we should be happy to suffer through a malevolent monopoly ruining the country. (and that we shouldn’t do what every other place has done and made work)
Indeed many companies are threatening the continuation of life on planet earth due to this great excuse “I’ve got to make the most money NOW for my shareholders”.
Never mind the fact that Telecom could have made far far more money by building a quality network and offering decent plans.
And the whole process would stand a chance of working if it wasn’t due to the extreme monopolistic position Telecom is in. (combined with abhorant anticompetitive practices)
I am however optimistic that this is signaling a difference in this new Telecom, sure they DON’T play fair and the competition need to be very very wary of that but this is going to deliver a far higher quality network to the majority and at a relatively swift rate (IF lived up to).
So I feel sorry for other ISP’s who have been maliciously screwed over by Telecom and dispair at the lack of competition this seems to signal but for the first time a believe New Zealand will have a better network in place and hope that the ‘Go Large’ aspirations that the network wasn’t able to cope with will be recreated once a vaguely decent network exists.
Incidentally I have fibre going down my road so I wonder if there is any chance of that being accessible once this new network gets going. Right now it just sits there and no one is able to access it, it’s a residential street and I only know about it after speaking to a Telecom Engineer doing some work just outside.
OK folks, read this article and tell me whether in NZ we should hitch ourselves to a BT style star or a Virgin Media style star for broadband?
http://news.bbc.co.uk/2/hi/technology/7112373.stm
Ernie has had a rethink …
http://www.tuanz.org.nz/blog/e379f711-b2b6-4423-9e32-4a8bf9f301db/cdf28269-9e22-4b68-ac35-828b825ab626.html
How on earth was anyone surprised about this? That just goes to show all those who were surprised, really don’t know snot about the business they claim to be in, which is far more of a problem surely. This was never a secret.
This is the reason why the smarter ones want an open wholesale access network, not LLU.
Take an open FTTH network for example. 95+% of customers would have their needs met perfectly fine through the wholesale Layer 2 access between them and their provider of choice. This would be a dedicated home run fibre to the cabinet/bunker/exchange. It terminates on Layer 2 ethernet kit, and a the customer’s line is placed into the equivelent of a VLAN that seperates them from other customers. (It might be using VPLS or PBT or something else but it’s easy for most to think of it this way.)
The remaining couple of percent that had special requirements, e.g. they wanted 10Gb access, or super high SLAs, would get a dedicated fibre to the local cabinet/bunker/exchange, and then a dedicated fibre or wavelength from their to the POP/Node/exchange (pick your terminology) where the providers telehouse their equipment. The dedicated fibre/wavelength is then directly connected to the providers network to whatever specs they require.
Not rocket science. And you can do the same thing with the Fibre to the Cabinet / then DSL over shortened copper style access network that Telecom is now rolling out. One day (50 years from now in NZs case) fibre will then extend from those cabinets to the homes. But if you don’t do it right, with the right input/etc. then it wont be open for others to use, and it’ll be difficult to wholesale, wont be flexible (mainly because they’ll use PON which the telco’s seem to be in love with despite its disadvantages for what the public wants).
*phew* end rant.