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01 Jul 06

How will unbundling the local loop benefit end users?

In order to answer this question one must first ask – what is the local loop?

The simple answer is that the local loop (often referred to as the ‘last mile’) is the phone lines running from 120+ telephone exchanges to all homes and businesses around New Zealand.

So what does unbundling the loop mean? In layman’s terms, unbundling the local loop (LLU or ULL) means that independent operators, whether they be telcos or ISPs will be able to put their own hardware into the telephone exchanges, to provide broadband or other services and make use of copper phone lines to deliver independent services into all homes and businesses in New Zealand without using any NZ Telecom service or equipment.

Why do internet providers want unbundling to occur?

Internet providers want to offer better prices, speeds, and quality of service. At the moment this simply isn’t possible. Unbundled Bitstream Service (UBS) - the wholesale broadband service - has allowed ISPs to wholesale Telecom’s Broadband, but margins are slim, the speeds and quality of service are dictated by Telecom and the playing field isn’t level in terms of competition.

Broadband speed and quality has been held back in this country and, while we see countries such as South Korea leaping ahead in entertainment and business services offered over broadband, development of such services here hasn’t been worthwhile.

I recently heard a comment that independent ISPs are just ‘preying on Telecom’ and using the government to force Telecom to provide cheap/free access to the local loop - thus negating the years of investment Telecom had made. The same comment labeled the government as being anti-business.

Well, Telecom didn’t build the local loop - it was built over a 100-year period by the old Post Office using taxpayers’ money. In fairness, Telecom has maintained the local loop since the late 1980s however it is very well compensated to do this with almost $1 billion per year in local line rentals.

The government – on behalf of the business and residential community – is the beneficial owner of the local loop. It’s clear that Telecom has not acted in good faith towards the beneficial owner over the past 5-6 years with high internet prices and illogical and questionable constraints on the quality and types of internet service available.

What will local loop unbundling achieve?

At its most basic level it will enable ISPs to design their own broadband and telephone packages to meet the needs of their target market. More variety and choice means better value for the end user.

At the next level, a whole variety of services delivered over broadband will fundamentally change the way we do business, access entertainment and other information. Once the new competitive environment is alive and kicking we’ll see a boom in the development of high speed data services offered, from VoIP calling to TV and movies delivered over broadband. While a small section of early adopters are already accessing entertainment online I’m talking about the difference between queuing a TV show to download and waiting several days, or pushing a button and ordering TV on demand, or streaming live events over broadband direct to the customer’s living room.

Unbundling the local loop will be the catalyst that finally encourages ISPs and other service providers to develop the types of services that until now we’ve only been able to observe in other countries.

Imagine a single phone number that follows you from home, to cafe, to airport and overseas - seamlessly making and receiving calls as though you were at home. Imagine choosing your TV shows for the week and scheduling them to be ready for viewing at your whim. Imagine never having to say “I need to email you a large file, will your ISP accept it?” again. Imagine accessing business information without delay.

The first internet revolution happened when dialup internet hit mass market. We’re now looking at the second internet revolution in New Zealand. Unbundling will bring competition, choice, and services, at prices previously undreamt of in New Zealand.

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