Orcon plea to ComCom: don’t price us out of fibre cabinets

Orcon boss Scott Bartlett says Telecom Chorus’ roadside fibre cabinets offer scorching performance, and he wants his ISP’s gear in all of them - but can’t afford to at rates currently proposed by the Commerce Commission.

The ComCom has made positive noises in return (keep reading).

Mr Bartlett says he is completely sold on the technical need for neighbourhood cabinets, which bring fibre closer from a phone exchange to a closer to a customer’s door.

Orcon has a D-Slam (which links fibre from the exchange to a copper connection running to a customer’s house) currently on trial in a Telecom Chorus cabinet in Auckland’s Browns Bay.

However, he also fears that the Commerce Commission’s initial determination on what Telecom can charge rivals to place their gear in its cabinets (a mind of mini-me version of local loop unbundling called “sub-loop unbundling") is set to high.

In an open letter to Telecommunications Panel member Paula Rebstock, released this afternoon, Mr Bartlett uses relatively mild language in a general plea for the commission to “ensure viable competition results” when it makes its final determination on sub-loop pricing, expected during May or June.

Mr Bartlett doesn’t quote any dollar figures in his letter, but in comments prior to its publication, the chief executive broke down proposed cabinet costs for NBR, elaborating on figures previous quoted in Keallhauled from Vodafone’s point man on regulation, David Diprose (read: Roadside cabinets a roadblock to competition).

It would cost ISPs like Orcon $630 a month to rent D-Slam space in a Chorus cabinet, Mr Bartlett says, plus a further $700 to $900 in backhaul charges. Additionally, Orcon would have to pay $130 to connect each new customer to a cabinet, compared to $75 for an unbundled exchange - despite the cabinet connection process being easier, in Mr Bartett and Mr Diprose’s estimation.

Mr Bartlett says this pricing makes it uneconomic to install Orcon’s own gear. His ISP would need 20-25% market share in any given neighbourhood (each cabinet serves 200 to 300 homes). Yet no ISP, outside of Telecom, has anything close to that share.

With around half of urban customers scheduled to be served by cabinets once Chorus’s rollout is finished, Mr Bartlett says his company, and other ISPs, will effectively be shut out of 50% of the market.

Mr Barlett's plea answered. Maybe
A Commerce Commission spokeswoman responds: "The costs that Scott quotes have all been mentioned in previous drafts of the STD [Standard Terms Determination  on sub-loop unbundling]. However, it should be stressed that prices for the STD have not been finalised and are still under active consideration."

The commission will listen to all industry parties, "including Orcon and Vodafone" as it reviews its draft cabinet pricing, which the spokeswoman says was "based on a combination of costs and international benchmarking."

Telecom adds that if ISPs like Orcon and Vodafone don't like the Commerce Commission-set cabinet rates, they have the option of buying a feed from Telecom Wholesale (whose D-Slams, which occupy half the D-Slam space in each cabinet) as an alternative to installing and renting space for their own hardware.

Although he doesn’t include the theory in his letter to Ms Rebstock, Mr Bartlett contends that the commission has been unduly influenced by Telecom’s submission on pricing. “There’s a danger the final pricing will be ridiculously uncompetitive,” says Mr Bartlett.

While praising Telecom’s (network building) Chorus division for its customer service and widely-praised cabinet rollout, Mr Bartlett says that Telecom Wholesale staff (which sells access to infrastructure built and maintained by Chorus) have at times behaved like “a pack of mongrels”.

Mr Bartlett says that Telecom’s old “bullishness and arrogance,” absent since it was unbundled in March last year, has now returned.

A specific example, he says, is that the company refuses to tell Orcon the specific length of each copper cable running between a customer’s home and an exchange or cabinet, making it a lot harder for Orcon or another independent ISP to implement an upgrade to VDSL2 - the fastest flavour of copper line connection, which will supersedes ADSL2+, currently being rolled out. Telecom will roll out its own VDSL2 upgrade later this year.

Another criticism, voiced by Vodafone’s David Diprose, is that Telecom has not left enough physical space in its cabinets for rivals to install more than a single mini D-Slam, making it even less economic for others to install their own gear.

The commission has previously told NBR that Resource Management Act constraints prevented roadside cabinets from being made larger.