TelstraClear bets on Pretty Damn Boring broadband

, posted: 29-Jul-2006 15:41

Chin-chinTelstraClear has been adrift in New Zealand for a while now. The second-largest telco hasn't been able to bypass Telecom's vice-like grip on the last mile and been largely left out of the broadband market here.

An effort to resell Telecom phone lines and DSL over it never took off for TelstraClear, which is no surprise given the narrow wholesale margins provided by the incumbent.

Sol Trujillo nixed TelstraClear's plans to build a third mobile network here, and when Rosemary Howard was sent back to Australia most people thought that was the beginning of the end. Dr Alan Freeth was brought in as a CEO but he had no telco experience. It was thought his job was to groom TelstraClear for inevitable sell-off.

Last year, TelstraClear was forced into a humiliating deal with Telecom on Commercial Unbundled Bitstream, despite winning access to a regulated service. Telecom said it would challenge the Commerce Commission's determination in court and delay the introduction of the Regulated UBS so TelstraClear backed down and settled for a commercial agreement instead.

TelstraClear is however battling on with its Pretty Damn Quick or PDQ broadband, which is based on the deal struck with Telecom in December, but with a 512kbit/s upstream option added. It took TelstraClear over seven months to get PDQ off the ground, but what's there to show for all the time?

Well, PDQ is Pretty Damn Similar to all the other CUBS-based DSL services in New Zealand. It costs about the same, has the same performance (or lack thereof) and comes with hooks like having to keep your landline calling with TelstraClear.

The one good thing the PDQ service has is the flexible usage charging. You don't get throttled down to dial-up speeds or have to pay penalty rates when your data cap has been exceeded. Instead, you can buy either 1GB or 10GB "packs" at $2.95 or $11.95 respectively. Not that cheap, but better than Telecom's offering.

That's it though: Freeth admits that TelstraClear is at the mercy of Telecom when it comes to providing an acceptable standard of service for PDQ. As Alcatel recently reported, the copper network with DSL tacked on top is already performing badly. More customers isn't going to help. But, this is what TelstraClear is stuck with until January.

PDQ is residential customers only. Business customers have the HSI service to choose from with 3.5Mbit/s downloads and either 128k or 512k uploads, plus 10, 20, and 40GB monthly caps. They are essentially the same as Telecom's Xtra DSL plans, with the 2¢ per MB excess charge. However, you have to spend $20 a month on toll calls, otherwise the plans cost $10 more.

Nic Wise over at his blog has done a quick comparo of Orcon and TCL's new plans, and isn't impressed. He is a customer of TelstraClear's Saturn cable, and can't resist rubbing it in for the rest of us... yeah, nice, Nic, that you and others get a free upgrade to 4Mbit/s downloads on your 2M/2M connections while the daft Auckland NIMBY mayors swallowed a bunch of FUD and stopped a $2 billion HFC network build-out here.

One interesting thing to note is that the Saturn cable service has only some 20,000 customers on it in Wellington and Christchurch. In comparison, TelstraClear still has some 200,000 dial-up customers that it hopes to convert to PDQ ones.

I detected a slight note of desperation in Freeth's voice on Friday when he talked about the future of TelstraClear. It's hard to imagine that PDQ will be a rip-roaring success that will ensure TelstraClear remains viable; Telecom's wholesale terms for CUBS aren't good enough for that.

Freeth made several references to Sol Trujillo taking a hard look at the future of the New Zealand operation, and said that much hinges on what happens in Tauranga. TelstraClear is building a WCDMA-based broadband service there for $50 million next year. If it succeeds, Trujillo might loosen the purse strings some more and allow TelstraClear to build in other parts of the country as well. However, Freeth wouldn't tell me what kind of uptake is required for Sol to be happy. He would only say that a substantial number of Tauranga's 120,000 people would need to be in the TelstraClear fold on the day of reckoning.

Tauranga is a retirement town where people are unlikely to be interested in network connections to the same extent as say Auckland, however. Interesting test site for a service that TelstraClear's in the country seems to hinge on, in other words.

Maybe the low uptake of the Saturn service is spooking TelstraClear still, but wouldn't it make more sense for them to jump into bed with Vector in Auckland and start delivering a fibre to the home network?

More information

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

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