Editorial: Credibility at stake

OPINION: Telecom has reacted with comparative haste to repair the damage caused by its latest network failure.

A $5 million make-up package sounds substantial, even though, as noted by some users of the XT network, it is impossible to adequately compensate for potential communication that did not take place. Callouts to plumbers or electricians who relied on the network might have gone to rivals with listed landlines, perhaps even resulting in long-term loss of business. A failure of this nature could very easily have been a matter of life and death.

With the network out of action for up to three days for South Island customers, the debacle has been particularly damaging to Telecom's reputation. The $5m package, plus a further $250,000 for lower South Island charity projects, illustrates just how seriously the company views the situation. However, business customers in particular most probably would prefer a declaration that Telecom knows what caused the failure and an assurance that it will not happen again. Lost loyalty can be devilishly difficult to win back. Setting up an independent review into the crash might help – but only if Telecom is upfront with the results and offers credible assurances on future reliability.

The ritzy launch of the XT network last year was – like the CEO's employment package – excessive by New Zealand standards. This makes the second failure in as many months even more noteworthy. The company's confirmation that it is considering "outsourcing" hundreds of high-tech jobs to overseas companies will likely represent a further PR challenge – even if shareholders might see benefits in lowering costs. Last week's events are sure to make any move to shed technical staff that much harder to sell, no matter how attractive a business case might look on paper.

- © Fairfax NZ News