New Zealand plans boost in DSL competition

Von Juha Saarinen

New Zealand"s Commerce Commission has handed TelstraClear Ltd. what the telco wanted as an access seeker for reselling Telecom New Zealand Ltd."s DSL products.

In a draft determination released yesterday afternoon, the Commission concluded that Telecom faces "limited competition in a national wholesale market the provision of broadband services," presumably because the incumbent still has a last-mile monopoly and thus is the only game in town.

If the draft determination becomes finalized after the obligatory further submissions and talk fest, Telecom has to supply TelstraClear with DSL (or "bitstream access service" as the Commission terms it) that is full-rate downstream up to the maximum capacity of the DSLAM or up to 8Mbit/s on short distances. However, network engineers Computerworld has spoken to say such high speeds are impossible to achieve with only 128kbit/s upstream, which is what the Commission has specified. With such a narrow upstream speed, engineers say experiments have shown that around 4Mbit/s is the maximum downstream speed, due to TCP Acknowledgment packets saturating the upstream channel. However, TelstraClear says in a submission to the Commerce Commission that it isn"t seeking to revisit or circumvent the 128kbit/s up channel limitation.

Possibly in the wake of Telecom being accused of sabotaging voice over IP by introducing unnecessary latency on UBS, the Commission requires Telecom to switch off the DSL signal interleaving error correction mechanism for customers if TelstraClear requests it. Interleaving adds a substantial 40 to 50ms of delay to connections. Static IP addresses should also be allowed, says the Commission, as the cost of providing one is minimal compared to dynamic addressing.

Although Telecom currently imposes an average download limit of 10GB per user per month, and a network limit on the commercial proxy UBS with a penalty for excess usage, the Commission says in the draft determination that the "bitstream service must be provided without any usage limits on data downloads".

The Commission also says the service supplied to TelstraClear should have "no material difference" in terms of the network-based characteristics that Telecom applies to its own retail DSL services. Furthermore, Telecom has to report on key quality parameters to ensure that consistency of service is achieved. These parameters include network latency, jitter (latency variation) and contention ratios (the number of users sharing the connection).

For the pricing, the Commission has set the residential wholesale charge at NZ$26.19 (US$19.07) excluding GST, which equals a retail price of NZ$31.19 minus a 16 percent discount, based on international benchmarks. However, the business wholesale charge is lower -- NZ$25.87 excluding GST -- and this is something that Telecom sees as a major area in which improvement to the draft determination can be made, according to Bruce Parkes, Telecom"s general manager of government and industrial relations.

Parkes says otherwise that Telecom is "open for business" if other access seekers wish to discuss different download speed plans, but cannot at this stage say whether or not the draft determination will apply to providers other than TelstraClear.

TelstraClear is over the moon with the draft determination, hailing it as delivering "true wholesale service". Although the upstream speed remains limited to a niggly 128kbit/s, TelstraClear regulatory and industry affairs manager Grant Forsyth says that with no speed or data caps, TelstraClear can buy high-speed internet access from Telecom and use it to offer innovative services that better meet customer needs.

Forsyth says the present commercial proxy UBS service was priced too high for TelstraClear to compete effectively in the broadband market, and singles out the NZ$100 per customer "churn fee" as an impediment for customer choice.

Similarly, Telecommunications Users Association of New Zealand head Ernie Newman is dancing a jig over the draft determination. Newman lauds it as a "breakthrough for residential and smaller business broadband users" and believes it will enable TelstraClear to enhance Telecom"s services rather than just reselling them at a small margin.

Taking a potshot at the incumbent, Newman says Telecom has often criticized TelstraClear for running to the regulator rather than accepting a commercial solution. However, the draft determination vindicates TelstraClear"s approach, Newman says, as it shows that Telecom"s commercial offer was "very unattractive" compared to what the regulator eventually settled on.