Telstra in Australia feels VoIP competition heat

, posted: 8-Apr-2006 08:28

Voice over IP (or Internet calls as the easier term is) are taking big chunks out of Australian incumbent Telstra's calling revenues, the Sydney Morning Herald says.

Telstra must be looking with envy at its trans-Tasman equivalent, Telecom New Zealand, which has managed to side-step this competitive threat by hanging onto its local loop monopoly and over it, providing a DSL service that is designed to break VoIP.

Telecom is entirely within its rights to do this, too. Although its commercial wholesale and retail broadband offerings are not bound by the daft specifications set out in the amendments to the Telecommunications Act 2001, customers still get that kind of service. That is, low upstream speed (128kbit/s although there is now a new 512kbit/s alternative) high jitter (delay variation of 500ms), massive latency (up to 1 second)... this is in step with the Act that says a regulated bitstream service must not support any real-time services.

It isn't entirely clear why successive National and Labour governments have taken the attitude that a privatised telecommunications monopoly is good for the nation, and enacted laws and regulations that prevent the New Zealand competition watchdog, the Commerce Commission, from acting against Telecom in a timely manner. Some Wellingtonians close to the Beehive say it's an ideological experiment that is being allowed to run its course. I really hope that's not the case, as it would be exceedingly cynical. The Australians to their credit have no compunction about putting halts to Telstra's anti-competitive behaviour when needed. The ACCC there has real teeth, and goes out to bat for telco customers regularly.

In NZ however, the ComCom has no enforcement powers built into the Telco Act. There are some it can use in commerce and fair trading legislation, but so far, Telecom has got away with:

  • Forcing ISPs and customers to use a special 2c per minute 0867 prefix for dial-up calls, even though the Kiwi Share or Telecommunications Service Obligation (TSO) mandates free local calling; that was 1999, and the Commission investigated Telecom and there will be a court hearing... next year. That's right, in 2007.
  • Also around 1999-2000, selling data tails at wholesale rates that are higher than retail ones. Again, the Commission investigated, took Telecom to court, but what's happening with the case?
  • "Seriously misleading" customers in 2001-2002 and breaking the Door to Door Sales Act with mobile phone sales campaign - Telecom doesn't have to refund customers however, even though it broke the law. Unlike other companies that break commercial laws, Telecom wasn't fined either.
  • Launching retail broadband plans six weeks before they were made available to its wholesalers, thus taking customers from the latter who hadn't even started negotiations with Telecom over the new products yet.
Telecom has been fined in the past for breaching the Fair Trading Act, but the fines are piddly: $5,500 and $11,000 are the figures I've seen. For a company that makes around $50 million a month from its line rental alone, that's petty cash.

I have spoken to the different Communications Ministers about this, and asked why it is that only New Zealand gives its incumbent telco such free reins. Paul Swain, who held the job before David Cunliffe, blamed the initial privatisation process, which created Telecom New Zealand without any regulation at all - he said that was a mistake, and compared it to latter-day telco privatisations where governments without exception ensured that there is enforceable regulation to prevent abuse of market power.

Swain never did anything about the lack of regulation however, as he didn't have support in the cabinet. Cunliffe has so far shied away from action, but has been forced to launch a strange and slow process that he termed an "industry stocktake". This will be ready by June or July this year, but nobody expects it to have any effect on the current situation.

Other related posts:
TDD vs FDD for LTE
Huawei TDD LTE demo aboard the Shanghai MagLev train
Apropos that new Telecom logo

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