In a country with a state sanctioned corporate monopoly on telecommunications, its nice to see that there are others out there that are finally telling Telecom that its bullshit just doesn’t grok.

The OECD has shot down Telecom’s excuse that free local calling is behind New Zealand’s poor uptake of high-speed internet, saying the company is abusing its market position.

“The OECD has never argued that free local calling means there is more of an incentive to stay on dial-up than move to broadband,” said Dimitri Ypsilanti, head of the telecommunications unit in the organisation’s Paris-based Directorate of Science, Technology and Industry.

“There is no evidence to link broadband penetration with the existence of untimed local calls.”

OECD takes shot at Telecom – NZ Herald

Before I get in to my rant, I should disclose that one of my best friends hold a managerial position within Telecom (I’m not going to be more specific than that to protect their identity) and that some of what I say here might piss them off a bit. On the other hand, they’re a level-headed person and generally find my rants against Telecom amusing, if nothing else. ;-)

In response, Telecom restated its view that free local calling was the key reason why people were staying off broadband, in that it was allowing dial-up users to stay online for as long as they wanted without incurring further charges.

Telecom said this was suggested in “more than one OECD report this year – and needed further consideration by the Government”.

But Ypsilanti, whose directorate is responsible for researching and analysing internet trends across the OECD, said Telecom’s reasoning was an excuse. He said broadband uptake had flourished in other countries with free local calling, such as Canada and the United States – ranked sixth and 12th.

“The problem in New Zealand is the lack of competition,” he said, adding that a key Government decision in 2004 had prevented competitors from accessing Telecom’s network.

This resulted in high prices and slow speeds, and had allowed the company to put caps on how much data customers could download.

“That’s a disincentive for people to sign up – there aren’t many countries with data caps. This is the outcome of lack of competition,” he said. “Telecom has a bottleneck and it is abusing its bottleneck.”

OECD takes shot at Telecom – NZ Herald

Here is a really good example of how Telecom is completely misguided. It thinks that people in New Zealand have no clue about how the international market for bandwidth works? It thinks that we don’t know people overseas that have broadband?

My friend in Kitchener, ON, has a flatrate broadband connection. For CA$30/mnth they get a full 7meg downstream and 2meg upstream DSL service with no data limits or price caps on it. If they want to do something, the just do it. If they want to watch a streaming video, the just watch it.

In New Zealand, I have a 256Kb/s downstream and a 128Kb/s upstream. If you take in to account the DSL line rental, the ISP fees and so on, for 20gig a month I’m paying NZ$100. I’m sorry, but that just doesn’t wash. The Canadian dollar is worth about the same as the Australian dollar. So why is there such a massive difference in pricing?

Any administrator can tell you that its cheaper for a router to have larger data pass through it than it is to restrict the data going through it. In fact, data passing across the router ultimately costs next to nothing. You’re still going to spend the same amount on someone to manage it whether there is only 256Kb/s going over it, or 100Mb/s going over it. Bandwidth is essentially costless. If there is a bottle neck, then you increase your monthly fee to use it so that you can cover the cost of installing a faster router or a secondary router. But the bandwidth cost isn’t going to change.

Telecom in this country is gauging its customers. Unfortunately, because the Labour government in the 1980s didn’t have the brains to hold on to the lines when it sold the telephone systems of the Post Office, we have a situation here where the only company with the lines laid down is Telecom. And everyone else has to pay Telecom to access them. I call this the Telecom tax. Even if you’re a Telstra Clear customer, every call you make and receive is still putting money in Telecom’s pocket because that call still goes over wires owned by Telecom. The only way you can avoid this is to go with Telstra Saturn’s cable services or Woosh and never dial a Telecom land line.

The Government of New Zealand needs to force Telecom to unbundle the loop. It needs to force Telecom to distribute wholesale bandwidth to the various ISPs and Telcos at a fair and marketable price. The pricing structure has to be exactly the same for the various ISPs as what Xtra pays.

If I had my personal preference, the Government would force the company to split those two divisions off in to completely seperate entities. For Telecom, it would be no different to what they did with their line maintenance companies. And there is now real competition in that market place starting to emerge.

Of course, doing that would completely destroy whats left of the kiwi share agreement, but it would also introduce real competition to the market in this country. Telecom couldn’t strangle us with fees for every thing (like paying phone rental even when you’ve proven you own your own phone) or use its other companies to provide a massive discount (ie, Telecom Mobile offering services with Telecom Residential to entice people away from Vodafone NZ.)

Telstra Clear recently said they weren’t going to compete for the residential market any longer because they simply couldn’t do so against Telecom. And personally I think that is a massive and dangerous tragedy. If the largest Telco in Australia can’t even compete fairly against Telecom in this country, what does it say about the marketplace here in general?

Hopefully this will make the government wake up. David Cunnlife has to take notice of this. He’s completely useless if he doesn’t. The Labour party has always been quick to bring out OECD stats about New Zealand in the past. This is one of the more important in my view and should be dealt with immediately. Preferably with action through Parliament.

Communications Minister David Cunliffe agreed with Ypsilanti’s statements. “While free local calling may well have been a factor a few years ago, I think it’s much less important now,” he said, adding that the real issue was the high cost of broadband. “It’s still expensive relative to most developed countries.”

Telecom’s reasoning has incensed some experts. Colin Jackson, president of InternetNZ, said the company’s comments were “completely self-serving”.

“It’s specious, it’s simply not correct, it’s got nothing to do with it,” he said, pointing to Canada where broadband uptake is high despite free local calling.

OECD takes shot at Telecom – NZ Herald

I think I agree with Mr Jackson. Although specious is probably a bit too nice a word to be used in this situation in my opinion. ;-) What bothers me is that while David Cunnlife does acknowledge that the price is high, he seems to completely ignore the point as to why its high. In the past 2 terms of Government, why has nothing been done? Either by himself or by Mr Swainn.

In the mean time, we’ll all just have to continue to pay our Telecom taxes and wish for the day when a government in this country has the guts to stand up for the people and actually force Telecom to play fairly and equally.