Editorial: Telecom split a credit to minister

It's taken 18 years, but at last Telecom has lost its monopoly powers. Communications Minister David Cunliffe's approval of the plan to split the company in three makes yesterday a red letter day for customers and competitors, The Dominion Post writes.

No longer will Telecom be able to charge rivals more for access to its networks than it charges itself. No longer will customers have no choice but to accept over-priced and under-performing services from the dominant player in the industry.

Under the plan the company will be broken up into three separate units - a network business to control access to Telecom's fixed line network, a wholesale division and a retail division. Each will be required to operate as a stand-alone business and all three will be overseen by an independent group backed by the Commerce Commission.

By increasing the transparency of Telecom's operations, the separation will make it more difficult for the company to use anti-competitive measures to deny competitors' entry to the market and, by allowing rivals to compete on a level playing field, the separation will increase choices available to consumers.

The changes are a credit to Mr Cunliffe, who has done what no communications minister before him has done despite overwhelming evidence that Telecom was using its control of the fixed line network to advantage shareholders and unfairly disadvantage rivals and customers.

Under the regime created by the fourth Labour government when it sold Telecom to an American-led consortium in 1990, Telecom became a company that attached as much importance to defending its position in court and wining and dining politicians as it did to technological innovation.

The strategy paid off. Successive governments shied away from reform and the company reported windfall profits year after year. But they were profits that came at a cost. Customers were over-charged and New Zealand businesses were forced to use second-rate Internet services.

By the time the Government finally cried enough, two years ago, New Zealand ranked a lowly 22nd out of the 30 OECD countries in terms of investment in telecommunications infrastructure. For a small nation a long way from its markets that was a recipe for disaster.

Former chief executive Theresa Gattung, who infamously suggested in 2006 that "confusion" had been the chief marketing tool of telecommunications companies - and also forecast just six weeks before the Government revealed its plans to regulate, that it would not do so - has left the company. So have former chairman Rod Deane and many of the executives who successfully opposed regulation for so long.

The new board and new chief executive, Paul Reynolds, have adopted a more constructive approach to dealing with other industry players and the Government.

That is a welcome development. But the lesson of the Telecom experiment should never be forgotten.

Governments should not sell monopolies unless they are able to regulate to protect the national interest. The failure of successive governments to do so, has cost consumers hundreds of millions, if not billions, of dollars and set back infrastructural development several years.

- © Fairfax NZ News