2degrees co-location plans stalled

In a strange twist, third mobile start-up Two Degrees appears to have stalled plans to co-locate equipment on Telecom and Vodafone's towers, after spending years fiercely lobbying the Commerce Commission for the regulatory right to do so.

Co-location is where a company places equipment on its rivals' towers to extend its network coverage.

The company's failure to proceed with co-location has angered the commission, which undertook an exhaustive and costly two-year consultation process with telcos, and passed regulation in December last year setting technical co-location standards.

 The Independent has obtained a letter sent earlier this month by commissioner Anita Mazzoleni to Two Degrees chief executive Mike Reynolds in which she queries why the company has not asked for many co-locations from mobile-tower providers and why it has breached a number of its regulatory obligations.

Two Degrees, formerly known as NZ Communications, has spent eight years attempting to build a national mobile network and become the country's third mobile provider.

It started life as Econet in 2001, headed by the vociferous Tex Edwards (now the firm's regulatory manager), who argued incumbent providers Telecom and Vodafone be forced to open up their cell towers to Two Degrees equipment.

The commission was "disappointed" few co-locations had occurred given Two Degrees had indicated as recently as April it had budgeted for one-third of its network to be co-located sites, and to possibly have 200 co-locations by year end.

Two Degrees' failure to ask for co-locations had likely resulted in significant resources and cost being borne by Telecom, Vodafone and Woosh, said the commission, as these providers had spent "significant time and effort" meeting regulatory obligations to allow Two Degrees to put equipment on their sites.

The commission reminded Two Degrees that it could face a High Court penalty for standard terms determination breaches. It said the company has breached regulatory co-location obligations, including making site database information available.

Telecom spokesman Mark Watts said the company was disappointed the anticipated volume of co-location requests had not eventuated. "In our view RMA constraints have probably been a factor, making large-scale co-location difficult to achieve."

Vodafone and Woosh declined to comment.

Reynolds is blaming resource management constraints for Two Degrees' failure to take up many co-locations. That's the same line he uses for the delay of the company's launch, now due in August. He said it has also proved difficult to put equipment on many Vodafone and Telecom towers because the equipment did not fit.

"We've gone through hundreds of possibilities, unfortunately most of them fall to the side for technical reasons  usually it's related to tower height. You can't get two or more [pieces of equipment] on there."

The company has spent more than $200,000 on  getting co-location regulation. "We're not avoiding it," says Reynolds.

He still assumed 30 percent of the company's network will be co-located on sites outside the main centres. Two Degrees has built its own cell-site network in the main centres.

Reynolds concedes the firm had not met some of its commission obligations, but says this  "administrative oversight" has been sorted.

Meanwhile, the firm this week resigned from the self-regulatory body, the Telecommunications Carriers Forum, which sets the technical standards for some regulatory services.

Two Degrees says the board is dominated by the three biggest incumbent networks Telecom, Vodafone and Telstra  who want to maintain their market dominance, not promote competition.

"It's a bit like the security council of the United Nations, it's supposed to promote competition, but the ones that can hurt competition the most, are the ones that have a veto on everything," says Reynolds.

On another front, the company's cornerstone private equity shareholders KLR Hong Kong, Trilogy, Tesbrit and GEMS, and Maori shareholder Hautaki Limited, injected a further $18 million in working capital for the company on June 4, as part of a share offer.