Hard News by Russell Brown

Not unbundling

It didn't take a genius to predict that Paul Swain wasn't going to impose local loop unbundling on Telecom. Even if the Telecommunications Commissioner's recommendation had been to unbundle, it might not have happened.

But the funny thing is that the commissioner, Douglas Webb, did produce a preliminary report that surveyed all the evidence and did recommend extensive local loop unbundling - giving Telecom's competitors access to its network and allowing them to install their own equipment in Telecom exchanges so they could compete on service delivery to residential customers. But then, for reasons that remain unclear, Webb changed his mind.

I'm not entirely convinced that sweeping unbundling would have been the right call anyway. Unbundling is essentially a response to monopoly incumbency, and if you're going to do it, you ideally do it at the time you deregulate your telecommunications industry, not 15 years down the line. There's a very real issue of property rights here (although probably only the Business Roundtable has publicly expressed sympathy for the rights of both Telecom and Maori foreshore claimants); and since it was floated, Telecom has been valued on the basis that it enjoys exclusive access to its own network. It would not have been trivial to wade into that. Those now building new networks - such as Woosh Wireless - also don't want to have to share them, and have strongly opposed unbundling.

What can be said is that New Zealand threw away a great opportunity when Telecom was privatised. The most damning indictment of the "light-handed" regulatory environment installed in the early 1990s can be found in OECD figures on telecommunications investment. Apart from the couple of years either side of Telecom's privatisation in 1991 (when the infrastructure was substantially upgraded: digital connections between exchanges, fibre to roadside cabinets) our national investment in telecommunications has been - pretty much any way you care to dice it - about half the OECD average.

By the mid-90s, Telecom's capital investment had fallen below the rate of depreciation. Meanwhile it positively hurled money at investors in the form of dividends, and exercised a brutal and obstructive attitude towards the competition. It had no reason to do anything else. It was the regulatory environment - the one Maurice Williamson used to tout as an example to the world - that failed.

It hasn't all been bad. Telecom responded better than many telcos to the network pressure that resulted from the rush to dial-up Internet from 1996, developing an IP backbone that handled the load pretty well. And it has done a reasonably good job of rolling out DSL capacity - just not of selling it. It's the fizz of real competition that's missing. And that's where the solution proposed by Webb falls badly short.

Telecom's competitors will be able to sell DSL service to us over Telecom's network, but the designated service - 256Kbit/s downstream and 128Kbit/s back up - can barely even be called broadband, but because it's where the commissioner has placed his flag, that's where the market will stay. We'll see a greater uptake of DSL, which is good - and a painfully limited choice of service, which is bad.

Yes, full unbundling might have fixed it, but another factor has been influential in economies, such as South Korea, where unbundling has been a raging success: public investment. The grim fact is that ever since TelstraClear got jerked back on the leash by its investors, no one has really looked like building a major network: yes, there's some action on the wireless front, but wireless simply isn't a total solution. For the future, it has to be fibre. The government has a chance to get the ball rolling by investing in the "advanced network" being proposed by MORST and others, and I think it should do so. In the meantime, the level of service designated by the commissioner should be revisited before we become an international joke.

The new Molesworth & Featherston extends some sympathy to the government over the "gone by lunchtime" debacle - and I'd have to agree to the extent that I think everyone comes out of it rather poorly.

The government, clearly, for the breach of faith in airing an MFAT official's notes from the meeting between Don Brash, Lockwood Smith and the six US congressmen, thereby compromising the role such officials play in future. Brash and Smith for their unfortunate and rather surprising failure to remember what was said about the highly important issue of the nuclear ships ban - important enough, it should be noted, to warrant National's specially-commissioned internal review of its policy stance (extra demerit points to Brash for urging the government to release the MFAT official's notes and complaining when it did so). And the New Zealand Herald, for following a stern editorial on the topic with a pompous and self-serving one that wriggled all around the fact that, as a story in the news section of the same edition of the Weekend Herald said, a published excerpt seemed to confirm the government's claims ("Dr Brash made the throwaway comment, 'If the National Party was in government today, we would get rid of the nuclear propulsion section today - by lunchtime even'.") - the day after the paper ran a report headed US senator shoots down PM's claim.

The Herald editorial made much of the official's description of Brash's statement as a "throwaway comment", and airily declared that the congressmen "did not take it as any sort of assurance". Which, really, isn't quite what Herald was saying the day before ...

Lots of Public Address readers appear to have visited greylynnweather.net in the past week or so. Ben Gracewood has also pointed out an online weather station for Auckland easties too. Steven Fox has run the site from St Heliers since 2001.

Meanwhile, it will be interesting to see how long the White House and the Pentagon can maintain the fiction that blame for the Iraqi prison abuse scandal falls solely on a handful of rogue soldiers. ABC has joined a procession of damaging investigations with an interview with a former military intelligence analyst who says the sexual humiliation of prisoners began as a technique ordered by the interrogators from military intelligence - and bluntly alleges a cover-up. If anything, this is going to get worse as court-martial hearings unfold and defence counsel for the soldiers start hauling in commanding officers - ABC has already run an interview with one of the accused soldiers, who says he was acting on the direct instructions of military intelligence officers.

Older stories - such as the US Army's imprisonment and abuse of Iraqis working for Reuters and NBC - are re-emerging in a new light. And the editor of the New Yorker, David Remnick, has given an interview to the Boston Globe about his star reporter, Seymour Hersh. And one-time Bush cheerleader Christopher Hitchens responds to Hersh's story with a column that doesn't make much sense.

And, in the interests of concluding on a brighter note: the cricket's on from tonight! Given the lack of build-up and the absence for now of Shane Bond, my hopes for the Black Caps' first test against England are modest. But I think they'll gain momentum and, hopefully, have an historic tour.

PS: Depending on your ISP (particularly if you're not in New Zealand) you may have found your attempt to use the feedback form on Public Address has bounced back to you with a note saying that the site has been blacklisted. The new US-based outgoing SMTP server that the mail bounces off has inherited a blacklisting on the Spamhaus blacklist. It's incorrect, and the CactusLads are presently trying to get the listing deleted. It will be interesting to see how long it takes.