Wholesale deal better than unbundling, says Orcon

, posted: 20-Apr-2004 23:00

Albany internet provider Orcon is first out of the blocks with a wholesale agreement that allows it to resell a
range of telco products and services to residential users. Inked on the fifth of this month but not released to media until 10 days after, the deal is "better than unbundling", according to Orcon managing director Seeby Woodhouse.

"Only TelstraClear could handle unbundling," Woodhouse said, because the costs for internet providers to install their own equipment into exchanges would be "in the hundred million dollar range".

That sort of money would place Orcon out of the running, Woodhouse said, whereas it could manage investments of $10 million or so under a wholesale scenario. Although he was not sure when Orcon would offer customers services based on the wholesale agreement with Telecom New Zealand, Woodhouse said they would "initially be based on the [Telecommunications Commissioner's] recommendations."

The Commerce Commission specified in its recommendations a low-speed ADSL service of 256Kbps download and 128Kbps upload, which cannot be used for "real time" applications such as internet telephony and virtual private networking.

However, Woodhouse said he hoped Orcon would be able to offer higher speed services after the wholesale agreement had been implemented. For the time being, Orcon would not offer traditional telco services such as phone lines, but was evaluating whether to do so in future. A big win for Orcon, according to Woodhouse, was the ability to send customers a single bill for the entire internet service.

Jetstream customers pay internet providers reselling the service as well as Telecom. Woodhouse said a single bill was what customers preferred, with some opting to go with Telecom's internet provider Xtra for that reason.

Orcon is also the upstream bandwidth provider for about 40 internet providers, who would also be able to access Telecom's network on a wholesale basis. Overall, Woodhouse termed the wholesale agreement with Telecom "a great success". His sentiments were echoed by internet provider ICONZ general manager Sean Weekes, who believes wholesale access to Telecom's network is a "fantastic opportunity".

ICONZ has been negotiating with Telecom as well, according to Weekes, but has yet to sign. "There are a few issues left to fix, such as the billing of toll calls, otherwise we could have signed a month ago," Weekes said.

News of Orcon's deal with Telecom was met with surprise at Auckland internet provider ihug, whose general manager of sales and marketing Duncan Shand accused Telecom of "picking favourites". Woodhouse denied that Telecom had favoured Orcon. "We have been pushing them [Telecom] for a long time now, for many

Shand said ihug had been trying to get Telecom to the negotiating table and that the internet provider was only at the beginning of the wholesale talks. Financially, the wholesale deal had "not much money in it" for ihug, said  Shand, with the main attraction being the ability to bill customers directly. Ihug was also concerned over the support costs associated with wholesale access.

Rival telco TelstraClear head Rosemary Howard doubted there would be much extra of value in the Orcon deal than the rest of the industry received from Telecom.

Other related posts:
The problem with VDSL2, part 2
The problem with VDSL2
The mysterious Dynamic Line Management on VDSL2

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