Future In the Balance For Kiwi Telcos

Future In the Balance For Kiwi Telcos

TelstraClear CEO Allan Freeth says that New Zealand telecommunication companies need to think carefully about the future if they are to continue developing and providing the services and products that Kiwi businesses and consumers have come to enjoy.

In a speech given to the industry’s TelCon 12 conference in Auckland, Dr Freeth called on the government to take a long hard look at legislation and regulations that are damaging consumer choice and holding back growth and innovation.

“Telcos are the proverbial frog in the slowly-heating water. In fact, in the past few years, the water has literally boiled over as Governments of various hues decided radical intervention was needed in the cooking process.

“We are caught in a turbulent period of change created not just by regulatory interventions, but by rapidly and dramatically changing technological advances and their impact on consumers and communities.

“The conventional wisdom of analysts and business commentators is that telcos will replace voice revenue with revenue from network services and applications, and by finding ways to monetise content and entertainment services.

“It takes an awful lot of applications and services to make up the loss of voice revenues and ignores the effect of the ‘over-the-top’ providers such as YouTube, Google, Amazon and TradeMe.

“This is a global issue, and the inequality of investment and return will find a solution in either competitive actions or commercial outcomes. Proponents of net neutrality have little understanding of the underlying economics of the infrastructure that supports the Internet, and who is making the money.

“A similar theme often revolves around the ‘peering’ debate, with a sort of ‘tragedy of the commons’ outcome, that will see network infrastructure, regarded by the few to be the purview of many, subject to ongoing lack of investment and eventual decay.

“The interventions we are now living with have altered the economic dynamics of our industry, splitting and diminishing profit pools, and potentially undermining ongoing investment by private interests, in the New Zealand telecommunications sector.

“While the current consumer frustration with data caps and usage charges is understandable, such perspectives are in violent opposition to the physics and economics of network infrastructures.”

Dr Freeth predicted that the government will be forced to intervene in UFB to make the uptake of fibre compulsory, as has been done in Australia, and to encourage SKY TV to move away from its monopolistic behaviours.

This second prediction will be necessary to ensure the success of the UFB, but the first will still be required because even making content more freely available won’t be enough.

“Should these two predictions, particularly the SKY TV intervention, not come to pass, then I predict that someone will be brave enough to seek a commercial resolution to the content problem by taking SKY on – despite being expensive and messy, but the pain is building.

“Finally, Net neutrality will become the victim of economics or telcos will give up the network business.”

ENDS

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