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Labour Scandals was born on 17th Fedruary 2005 to document various ethical, moral and competence problems afflicting our Labour-led Government. Labour Scandals is not linked to any political party, candidate or other organisation. However all dirt is considered, regardless of origin. Obviously I'm not interested in hearing of Helen Clark's glorious policies for funding the Royal New Zealand Ballet. In fact such emails will be deleted as fast as I can move the mouse.

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Tuesday, March 01, 2005

Labour Cabinet keeps Telecom local loop monopoly against Minister's advice

Research by Bernard Wooley

1. Local loop unbundling (LLU) is the name for requiring the owner of a copper telephone network to lease its wires to competitors. Usually the telecoms company in question was bequeathed its wire network by taxpayers, has a monopoly over an entire country or region, and has turned it into a nice little money spinner. With the advent of broadband Internet over copper wires (DSL/Jetstream), unregulated control of the telephone network gives a company near-monopoly power over fast Internet access as well as toll calls. Just like Telecom New Zealand has here.

2. According to an OECD report entitled 'Developments in Local Loop Unbundling', most OECD countries have regulated for local loop unbundling:
By the end of April 2002, 23 OECD countries had introduced, or at least legislated, LLU. This number is a significant increase in comparison to 1999 when only 12 countries implemented or adopted LLU policies. There are currently only seven OECD countries that have not yet implemented LLU: the Czech Republic, Mexico, New Zealand, Poland, the Slovak Republic, Switzerland, and Turkey.
3. The final decision on unbundling was made by the Labour Government in mid 2004: Telecom was allowed to keep its 'local loop' monopoly. This means all of Telecom's competitors depend on Telecom to provide access to wires going into every New Zealand home and business. At the time, Minister of Communications Paul Swain said:
the Government wanted greater broadband uptake by New Zealanders as rapidly as possible and in a more competitive environment. "In my view, the decision I have reached presents the best opportunities to achieve that"
(NZ Herald, 19th May 2004)
The Consumers Institute's opinion at the time:
Consumers will miss out on cheaper, better telecommunications services because of the Government's decision not to give Telecom's competitors access to subscribers' landlines, so called "local loop unbundling"
4. A month later it became apparent that the Labour Cabinet had decided contrary to the recommendations of Swain and the Ministry of Economic Development:
The Government's decision to let Telecom keep its monopoly on the local loop was against the advice of Communications Minister Paul Swain and the Economic Development Ministry.
(NZ Herald, 20 July 2004)
5. Prime Minister Clark later said it was a "fine line call", but clearly she made her decision based on some publicly unknown criteria or advice .

Haloscan Comments:


2 Old Blogspot Comments:

Blogger peasant said...

a) Clearly the Government share of Telecom is proving too lucrative to allow the evils of free exchange and competitive markets.

b) Labour has allowed further anti-competitive behaviour by Telecom and Telstra, with their de-peering of the Wellington internet exchange (WIX), and disabling access to a large portion of NZ websites

c) Telecom is allowed to continue its monopolistic price gouging of Broadband. NZ's connection to the vast resources of the internet is hamstrung. The Knowledge Wave conference was little more than hot air and lip service to commerce.

3/02/2005 10:09:00 AM  
Blogger Antarctic Lemur said...

Do you mean tax revenue? A highly profitable Telecom NZ is good for Government coffers.

3/05/2005 06:37:00 PM  

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