Telecom separation day broadband price rise a 'body blow' – Orcon boss

In an ideal world, people would switch to fibre connections rolled out under the government’s 10-year, $1.35 billion Ultrafast Broadband (UFB) initiative because they were faster, better, and attractively priced.

But, in the real world, there will also be a negative incentive to upgrade from today’s copper lines – they’ll get more expensive. And it’ll start to happen from Telecom separation day, November 30.

The Telecommunications Amendment Act, passed in June, enables the UFB, and the separation of Telecom.

It also allows for the “averaging” of the monthly wholesale cost of urban and rural copper phone lines.

Cheaper urban lines account for 72.45% of the total, more expensive rural lines the balance.

Averaging the urban and rural pricing into a single “average” price will bump up the cost by about 20% for urban homes and businesses.

A twist
Today, the Commerce Commission published a series of decisions on the implementation of the Telecommunications Amendment Act.

They include averaging calculations – and wholesale price rises on phone lines that will kick in three years from Telecom’s separation on November 30 (a long time away, but not as long as the five or six years or longer that some will wait for fibre under the 10-year UFB). Retail ISPs aren’t happy about this averaging, but have long been bracing for it.

But there's also a twist, which many had not anticipated: for a new naked DSL connection, the averaging “uplift” (or what most humans would call a price increase) will apply not in three years, but within days. The higher rate will apply from November 30. (Naked DSL is a broadband connection minus a phone line; see "Going naked" below).

For Telecom’s spun-off Chorus, which is dominant in today’s copper wholesale world, and will hold 74% of the Crown fibre roll-out by premise (with more in the offing through possible joint ventures with other wholesalers), today’s decisions confirm it’s in clover.

Body blow
Others are not so happy.

Orcon chief executive Scott Bartlett told NBR he was still digesting the commission’s decisions released this morning. “However, in essence this will reduce competition not enhance it,” Mr Bartlett said.

“I’m very disappointed.”

The Orcon boss said averaging, and the attendant price rises for naked DSL lines, would make it harder for ISPs to market VoIP services (where phone calls made over the internet rather than a separate, dedicated voice line).

“Just when competitive voice services such as Genius [Orcon’s VoIP phone and service) are getting off the ground, the whole proposition of VoIP gets dealt a body blow,” Mr Bartlett said.

It made no sense for a naked UBA (unbundled Bitstream access) copper broadband connection to be more expensive than fibre.

“This is simply the effect of policy designed to make copper artificially expensive in order to drive fibre migrations. So much for the three-year window.”

He added, “Consumers and innovation will pay the price.”

Strangling naked DSL at birth
Telecommunications Users Association chief executive Paul Brislen said his organisation was pleased to see the commission had split its undertaking in two, and would look at international benchmarks rather than rush into pricing decisions that would hold for years.

“However, the idea that naked DSL will increase in price is a concern,” Mr Brislen said.

“Naked DSL is in its infancy in New Zealand yet all the international trends suggest customers are quite happy to dump their voice line at home in favour of a cellphone but still need fixed-line broadband services.

“Naked DSL enables that, and with the Ultrafast broadband project focusing largely on businesses, schools and hospitals in the near term, New Zealand consumers will be stuck using copper for several years to come. It's important we don't squash this newly emerging market at this point in time.”

GOING NAKED: Associated with the copper connections most use today, a "naked DSL" plan lets you subscribe to a landline broadband connection only, and lose your $42-a-month phone line. It's useful for those who want to make all their voice calls via cellphone, or use the likes of Google Talk, Skype or a VoIP handset (such as the Orcon Genius pictured above) to make calls over the internet. Although Orcon has made the most noise about VoIP and naked DSL, most ISPs now have similar plans. The notable exception is Telecom Broadband, which with its keenly priced Total Home package is pushing customers in the other direction, encouraging people to buy a bundle of services that includes a traditional phone line.