Word has it that Telecom is under pressure from the Government to have a good think about structural separation. I have it on good information that Steven Joyce and Paul Reynolds (Telecom CEO) met late last week. And that separation was on the agenda.
What could that mean? A separation between the retail side of the business from the wholesale/networks and access sides? Perhaps even more than that, structural separation may also release value for Telecom shareholders. A separate Chorus with an unencumbered mandate may well be able to make a more active (and more useful) contribution to national plans for broadband infrastructure rollout and access.
Given the circumstances; major broadband decision imminent, reasonably radical proposed changes to the telecommunications services obligations (TSO), the fallout from the CEO salary bonus and Telecom’s attempts to reduce its service tech workforce and convert them to owner operators, you’d think there’d be some sort of shift in mindset from our largest telco.
But it doesn’t appear to be happening. I’ve been talking to lots of people and the views are pretty unanimous.
It’s like there’s an elephant in the room. And it’s the big question. What will Telecom do and what should it do around broadband? For the good of the company and the country.
So here goes. Three things. And they’re not all about Telecom.
Firstly, Telecom, it’s time to shift your attitude. I know your attitude has changed since 2007 when you had to separate. But you need to think about your future. You’re our biggest Telco company. It’s time to move away from thinking about yourself as just a Telco. Our future lies in broadband, arguably the most important piece of infrastructure to be introduced this century. It’s more than telecommunications. It’s infrastructure. We must get it right. If that means that Chorus should separate from Telecom in order to become an infrastructure-based company, then so be it.
Secondly, voluntary separation is a more satisfactory outcome than legislation. Although it still requires oversight to ensure it’s clean. But just look across the Tasman. Telstra is currently under the gun to voluntary separate its wholesale and retail arms, or face legislation to do so. The Australian Government has introduced legislation, which its Coalition Opposition is trying to delay alongside enormous pressure from Telstra.
The Australian Govt has a $43 billion plan to roll our broadband and splitting Telstra up is integral to how it needs to do it. As the Australian Communications Minister Stephen Conroy is reported in today’s Australian newspaper:
Every day of delay for these reforms is another day of higher prices, less choice and less service innovation for consumers and small businesses — including those in regional Australia.
Labour’s push to operationally separate Telecom was designed in such a way for further structural separation to occur down the track. Have we reached that point? And is it in New Zealand’s interest? Because, as I’ve said several times already, broadband is core infrastructure, it’s so much more than faster internet connections.
The National Government has today released its “invitation to participate” (ITF) and is seeking partners in its broadband initiative. So the pressure on Telecom is important because we’re approaching crunch-time. What role will Telecom play?
And one more thing. I’m hearing is that the rate of return being sought by Steven Joyce’s government on it’s $1.5 billion investment is not do-able. That the private sector is having difficulties justifying the investment it will need to make. In other words, the business model is flawed and possibly unsustainable. Which is a bit of a worry.
So finally it seems a bit disappointing that the government has taken all this time to get to the point of calling for partners in the broadband project. it’s been almost a year. When they won government, there was a scheme ready to roll. On a smaller scale, admittedly, but it was regionally-based, it ultimately was worth $1 billion and there were no strings attached, that is, no rate of return on the investment. It was about investing in core infrastructure. because Labour knew how important it was. We aren’t opposed to Telecom’s involvement, but not on the basis that is about propping up monopolistic practices and behaviours. The Australian Government is fully aware of that. I’m starting to think the National Govt might be. We’re watching, and we expect the broadband rollout to deliver for all New Zealanders.