INSIDE A WHISPER CABINET: The top half of the D-SLAM area (left-side of the cabinet) is taken by Telecom Wholesale hardware, creating a wholesale feed for any ISP that wants to buy it. The bottom half (or 42%) is left vacant for ISPs to install their own ADSL2+, VDSL2 or G/Pon (fibre-to-the-home connection) hardware.

UPDATE: Chorus, through spokesman Robin Kelly, says that its cabinet plan for the Onehunga exchange, mentioned below, is a draft only and could change after consultation with local government before work begins in around 15 months.

Mr Kelly emphasises that cabinet pricing is set by the Commerce Commission (Vodafone's David Diprose has never contended otherwise, but has asserted that the commission has leaned to far in the direction of Telecom's submissions on the subject).

In terms of the number of broadband connections available to each third-party inhabitant of a cabinet, such as Vodafone or Orcon, Mr Kelly says a standard ADSL2+ or VDSL2+ card has 48 ports. With four in place, 192 lines would be supported. Mr Diprose contents that Vodafone can only fit a mini D-Slam, accommodating fewer lines.

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For most internet users, the roadside cabinets being rolled out by Telecom’s network division Chorus are a welcome sight.

They bring fibre from the exchange closer to your door, and an ADSL2+ connection within 2km of households that would otherwise be too far from their local phone exchange to get this faster flavour of broadband.

The project has helping to bring ADSL2+ within most of the nation's reach, which is having a big impact on broadband speeds, as Epitiro has found in its latest survey for the Commerce Commission.

Certainly, your correspondent's only complaint - living equidistant between cabinet and exchange, both about 2km from chez Keall - is that there is not a denser deployment of cabinets, marching closer to his door.

As previously chronicled on Keallhauled, Chorus’ roll-out is proceeding with military precision, and at a cracking pace.

For Vodafone’s point man on regulatory affairs, David Diprose, the pace is all too cracking.

Mr Diprose showed NBR a map of Telecom’s Onehunga exchange in Auckland, which he has submitted to the Commerce Commission.

It is a typical example of an urban exchange, Mr Diprose says, in that 81% of households covered by Chorus cabinets lie within 2.5km of the exchange. That is, they could get ADSL2+ without any cabinets (a quick redraw at NBR’s request, around a 2km radius, still took in a clear majority of cabinetised lines).

Worse - for Vodafone - Mr Diprose acknowledges that Telecom has left physical space in the cabinets for competitor’s D-Slams (the piece of hardware that takes the fibre connection from the exchange to the cabinet, then feeds it to an ADSL2+ copper connection running the rest of the distance to a home or business).

But Mr Diprose says Telecom Wholesale’s gear takes 58% of the space in the half of the cabinet reserved for D-Slams ( see the photo above to judge for yourself).

As a draft Commerce Commission determination dictates, the rest of the space is left for competitors’ hardware, to be allocated by market share.

Chorus has said there’s room inside each cabinet for D-Slams from four to six competitors.

But Mr Diprose says this is only possible if each telco or ISP installs a mini D-Slam, which would only allow it to service around 10 customers (each of Chorus’ planned 3300 cabinets, being rolled out under the previous government's mandate for 80% of New Zealand to gain access to 10Mbit/s to 12Mbit/s broadband by 2012), will service up to 330 customers. They cost around $145,000 a pop).

With Chorus proposing to charge $635 a month for rack space inside each cabinet, and a mini D-Slam accommodating 10 customers, Vodafone would be an uneconomic $63.50 in the hole before the cost of services was factored in, says Mr Diprose.

Vodafone would need at least 50 customers running off each cabinet - that is, 100% of the space available to Telecom competitors - to make its presence “borderline viable”.

Mr Diprose also complains that all fees related to cabinets are higher than the equivalent service at an exchange. For example, Telecom charges Vodafone (and other providers) $75 to connect a new customer to an exchange, but has proposed $130 for a new connection to a cabinet - despite cabinets being new and easily accessible compared to the dense snaking cables that form an exchange.

The situation will get worse when Telecom starts to upgrade from ADSL2+ to the faster VDSL2 later this year (and Vodafone and Orcon likely follow suit, at least at the exchange level), for VDSL2 D-Slams accommodate fewer customers still.

With mobile issues like termination rates getting priority, a Commerce Commission swamped with telco issues has so far only made a draft determination on Chorus’ cabinets (or sub-loop unbundling, as it's known).

Yet Chorus continues its rapid build, with upwards of 330 cabinets already deployed, and more than 500 already built.

Mr Diprose says the Commerce Commission should have reached a final determination before the cabinets started to hit the streets.

His hope is that the commission’s overdue final determination will reject Telecom’s proposed wholesale price regime.

Like Orcon, Vodafone is trialling a Huawai mini-D-Slam in one cabinet (in Pt Chevellier).

But, for now, the physical space restraint, and the related issue of lousy wholesale terms, mean it would be commercially senseless for Vodafone (or Orcon or TelstraClear) to move its gear into cabinets in a mini-me version of unbundling that has already taken place in Auckland and Wellington exchanges.

And because cabinets cover connections to around half of urban customers, Vodafone finds itself locked out of 50% of the market in areas already covered by cabinets.

The result is a “chilling effect on competition” says Mr Diprose.

When in doubt, blame the RMA
Telecom and the Commerce Commission both tell NBR that Resource Management Act constraints meant that the basic Whisper Cabinet design (already pretty hulking; see picture above) could not be any physically bigger. And, indeed, there are few neighbourhoods that would want larger cabinets. ("Whisper" refers to the cabinet's sound insulation.)

More, Telecom says Vodafone, and others, do not have to install their own gear inside its cabinets. Instead, they can buy a feed from a cabinet from Telecom Wholesale, whose pricing is heavily regulated, with Telecom Broadband (formerly Xtra) barred from receiving any sweetheart deals.

Mr Diprose is a vocal critic of Telecom Wholesale’s ongoing pricing manoeuvres, but concedes they are commercially viable for cabinets - although his preference remains for Vodafone to have a direct presence with its own gear, and the direct control over technology and service that that would provide.

The horse trade
In an industry rife with conspiracy theories, Mr Diprose has one for cabinets. He reckons Telecom agreed to roll them out on an aggressive schedule (and a steep cost to itself; all up its spending around $1.4 billion unbundling exchanges and building cabinets, which has proved ruinous to its bottom line) in return for maintaining its lucrative monopoly on PSTN lines (that is, old fashioned voice call lines, which will someday be replaced Internet Protocol or IP calling, a la Telecom's first IP call made recently).

Now, by Mr Diprose’s take, Telecom has deftly manipulated cabinet pricing, and the commission's ongoing review of said pricing, to keep the best access to itself.

The world moves on
However, Telecom might not have the last laugh.

Albeit on a relaxed 10-year schedule, the government has now committed to rolling out fibre to 75% of homes. Retail telcos like Telecom and Vodafone will be barred from owning a majority stake in any of the part state-owned 25 Local Fibre Companies (LFCs) that will build fibre-to-the-door.

The current scenario, in which its possible for Telecom to own a connection from network to wholesale to retail simply won’t be possible. The world in which Telecom and Vodafone argue over cabinets will be obliterated.

As suggested in Keallhauled last week, Telecom could sell Chorus, freeing its infrastructure and networking division to compete for funding in the brave new world of part crown-owned fibre. (If so, the Whisper Cabinets are ready, by dint of their ability to take a G/Pon fibre card for delivery of fibre-to-the-door - be it under the auspices of the government's $US1.5 billion scheme, or a go-it-alone effort by Telecom or another party, a la Telstra's recent plan for Mebourne.)

That would ensure market relevance beyond the current cabinet tussle, but it’s a separation that could easily take two years, at a time when the first stage in the LFC tender process is supposed to take place in six months.