BuddeBlog

Telecom NZ has submitted its final binding UFB offer to Crown Fibre Holdings (CFH) in respect of the government’s Ultra Fast Broadband (UFB) initiative. The bid appears to cover all of the remaining 25 regions in the project and results in the structural separation of Servco Telecom and Netco Chorus (subject to shareholder approval). The aim is to list them separately, with the wholesale business unit being progressively aligned with Chorus.

Telecom indicated that it had now complied with all the government’s competitive pricing requirements. It will be interesting to see if the government agrees with this. However, the fact that Telecom in that same week was also fined for anti competitive behaviour – over a period of a decade – is a stark reminder that extreme care needs to be taken when making concessions to incumbents.

The company’s focus now shifts to preparing for the UFB environment regardless of whether it is accepted as a UFB partner or not. At the same time – in a cost saving exercise – it has indicated that it will reduce the executive team from ten to eight members, eliminating duplication in corporate services (from five to three execs), technology platforms and products.

Interestingly, it will progressively align its wholesale business with Chorus to provide a more seamless service for wholesale customers. The division of wholesale between Servco and Chorus remains a key unknown in the UFB process, particularly in relation to where backhaul fibre will sit.

Despite these announcements the future of the incumbent remains uncertain. The company had previously indicated that in order to move towards structural separation significant changes needed to be made to the proposed legislation. It will be interesting to see what concession the government has made that led to Telecom’s cooperation – according the government they are just ‘minor tweaks’. The company is facing stiff competition from the united front of a large number of utilities known as the Regional Fibre Group and they as well as the rest of the industry are worried that Telecom is getting special treatment.

There is widespread concern in the industry regarding possible backroom deals and a re-monopolisation of the industry if Telecom wins the remaining 75% of the project that is yet to be awarded. A key element of this is the proposed 10-year regulatory holiday for the UFB.

See also:

• New Zealand – Ultra-Fast Broadband Network – Competition and Regulations
• New Zealand – Ultra-Fast Broadband Network – Design and Deployment Strategies
• New Zealand – Ultra-Fast Broadband Network – Overview and Analysis
• New Zealand – Ultra-Fast Broadband Network based on Trans-Sector Model
• New Zealand – Telco Company Profiles – Telecom Corporation New Zealand – Company Overview – 2011

This entry was posted on Wednesday, April 20th, 2011 at 2:38 pm and is filed under From Paul's Desk. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.