Commerce Commission sniffs around Telecom-Telstra-Vodafone cable

Regulators are sniffing around the Telecom-Telstra-Vodafone transtasman cable, announced yesterday.

"We haven’t received a clearance application in relation to the cable joint venture. However we will be taking a look to see if it raises any competition issues," Commerce Commission comms manager Allanah Kalafatelis told NBR ONLINE this morning.

A finger in both pies
Telecom will have a (roughly) one third share in the joint venture, tentatively named Tasman Global Access (TGA).

That was seen as a point of possible concern by InternetNZ, the Telecommunications Users' Association, the Greens, and ISP CallPlus, given Telecom holds a 50% share in the Southern Cross Cable (currently NZ's only major broadband link with the outside world).

Vague target
So far, there's not much of a target for the watchdog to aim at. Vodafone CEO Russell Stannners yesterday told NBR that shareholdings had yet to be finalised (although it was anticipated each of the phone company partners would hold an equal share). It had not been decided in which country the joint venture would be incorporated (a key point in terms of regulation. Southern Cross Cable is incorporated in Bermuda, safely beyond the Commerce Commission's reach).

A management team has to be hired, and the cable not yet put out to tender.

CallPlus taking concerns to Commission
Meanwhile, CallPlus CEO Mark Callander says he will raise concerns about the cable with the Commission. He will also approach the partners in the joint venture.

"The real disappointment is this will prevent another cable being built which would have benefited the entire industry and ultimately improved competition for consumers," Mr Callander told NBR Online - echoing comments by Pacific Fibre co-founder Lance Wiggs, who says a second cable to the US is needed. However, Telecom CEO Simon Moutter and the other players had made it "essentially impossible to justify another cable."

Wholesale access fears
Mr Callander fears a cosy Telecom-Vodafone duopoloy is now in place, following Vodafone NZ's purchase of TelstraClear from Telstra. The Vodafone-TelstraClear deal included an element of transtasman alliance; Vodafone NZ has the contract to service the NZ business of Telstra's Australasian clients.

On a more technical level, there's the concern raised in NBR's story yesterday: whether or not ISPs other than Telecom, Vodafone and TelstraClear will get wholesale or other access to the new cable, and on what terms.

Telecom was vague on this point. "Another cable just makes the market more competitive but it's too early to say exactly how that will play out in terms of wholesale arrangements," a spokeswoman told NBR.

"Given the capacity of the new cable there should be plenty of wholesale access opportunities for players like CallPlus," Mr Callander told NBR.

"However I doubt this was even included in the business case – that is concerning part."

And if wholesale access to the new cable is not offered on competitive terms, then ISPs may balk at the cost of bandwidth, and we may not see the performance or data cap increases many are hoping for.

With the Telecom-Telstra-Vodafone business plan at such a sketchy stage, the access debate is necessarily vague, too.

But look for it to resolve into focus quickly. The trio say they will finish their cable by mid-to-late next year - a brisk timetable.

Follow @ChrisKeall

ckeall@nbr.co.nz

ISP market share 2012

Telecom: 49%
Vodafone-TelstraClear: 29% (TelstraClear: 16%; Vodafone:13%)
CallPlus*: 9%
Orcon: 5%
Others: 8%

* Including CallPlus' residential brand, Slingshot

Source: Commerce Commission