TELCON11: Joyce bites back at Freeth

Communications minister Steven Joyce devoted a big chunk of his TelCon11 speech yesterday to answering critics of the government's $1.35 billion ultrafast broadband (UFB) initiative.

In perhaps his most pointed words, Mr Joyce he would be happy to put away the taxpayers' cheque book and go home. But "telcos who seem to have large advertising budgets" had not declared their own ultrafast broadband plans.

For the industry audience, the minister's words weren't hard to decode. TelstraClear has taken out newspaper ads attacking the UFB, and its associated 10-year-regulatory holiday allowed for under the Telecommunications Amendment Bill. Chief executive Allan Freeth has labeled the UFB as network socialism that stifles private investment.

Mr Joyce has countered that a nationwide fibre roll-out - which he maintains would benefit business overall - would not happen, or at least for a long time, without the government stepping in to move things along.

Prices higher without 10-year regulatory holiday, Joyce claims
Mr Joyce also maintained that UFB pricing would be higher without the 10-year regulatory holiday from Commerce Commission scrutiny (or "forbearance period" as the minister prefers to call it).

For without the holiday provision, private companies would want to "price in" the risk of Commerce Commission interference.

Mr Joyce said that if the UFB companies - who start with zero retail customers - act like monopolies, then they would not attract customers who had the choice of staying on copper broadband.

But even so, the government was making double-sure by regulating wholesale pricing (see wholesale examples here) as part of each Local Fibre Company's contract. Pricing could not go up over the 10-year contract, but it could go down.

Critics dubious
Critics remain dubious. InternetNZ chief executive Vikram Kumar is among those who fear that wihile the regulatred UFB pricing looks attractive today, it may not fall, or fall as fast as other countries over the decade to come.

Forced migration from copper
In a corollary, opponents also fear a "forced migration" from copper at some point, especially if Telecom (or a spun-off Chorus) has control of both fibre and copper networks - jacking up pricing or otherwise eleminating competition from the older technology. IDC analyst and conference moderator Rosalie Nelson put the question to the minister during yesterday's session.

Mr Joyce said that no plans had been tabled to remove price regulation from the copper nework, nor had it been part of any UFB discussion. However, he qualified his comments by saying he couldn't speak for future governments.

Too much control
There was also a strong feeling on the floor that Local Fibre Companies should not have been given control of both layer one (dark fibre) and layer two (lit fibre, with electronics added) services. Many would like to see layer 2 services controlled by ISPs and other retailers, to facilitate more competition (layer 2 was thrown to Local Fibre Companies in a revised version of the tender).

Mr Joyce said he had always been open about the layer one/layer two issue, which he has called a pragmatic change to the UFB tender, necessary to make the project more attractive to private investors.