A new market research report for the telecoms sector in New Zealand has been released on the website companiesandmarkets.com. The title for the publication is “2009 New Zealand – Telecoms and Overview & Analysis” and the executive summary can be found here.

The report provides a great deal of insight into the telecoms sector in New Zealand. It finds that the total New Zealand market grew by 2% to $7.1 billion for the year up to June 2008. BuddeComm predicts that the total New Zealand telco market will grow around 2.3% in 2008/09 and 3.5% in 2009/10, although these growth rates could be up to 1% lower, depending on the severity of the global financial crisis.

New Zealand and the United Kingdom are the only countries in the world that have enacted functional separation as a regulatory tool. Citing many of the same reasons given on this site, the report states emphatically that implementation of this regulatory measure has benefitted users in New Zealand tremendously:

Even Telecom New Zealand has itself admitted that functional separation has already begun to stimulate competition in New Zealand. Existing participants now have the opportunity to extend their activities, and additional competitors now have more opportunity to enter the market which has previously been dominated far too much by Telecom. Smaller competitors now have more attractive wholesale arrangements coming into place and this will put further pressure on prices, which have historically been far too high due to Telecom’s overwhelming market dominance.

In Fiji, it’s FINTEL’s dominance over the international gateway that most closely resembles our New Zealand counterparts. The first stages of sharing under liberalisation are being implemented. However, until the prescription of functional separation is handed down from regulators, we will not reap the kind of benefit that New Zealand is experiencing now. Interestingly, even the incumbent operator in NZ acknowledges that the regulatory measure has been a positive development. How long before we see these steps being taken in Fiji?

An earlier post outlined how regulators in Australia would require Telstra to agree to a functional separation of its network and retail operations. This post is an attempt to explain how a shifting regulatory environment is forcing major changes for Australia’s incumbent operator. Later this week, another post on Telstra will highlight a recent court verdict which forms the basis for why funtional separation is an unavoidable reality for network operators like FINTEL.

Leadership at telecom operators around the Pacific would be wise to look at the situation Telstra finds itself in down under. The Australian, reports on what can only be described as an implosion. Telstra finds itself battling government regulators, trying to piece together a functioning board of directors, selecting a successor

Telstra comes under attack on many fronts

for a very controversial CEO who has been sent packing, and in the latest development, likely prospect of a shareholder revolt.

Under the confrontational leadership style of CEO Sol Trujillo, the company has for years bristled at what they called burdensome government regulation. At times, this has resulted in Telstra carrying out a quite vocal campaign against Canberra. The aggressive stance of the company under the Trujillo-era culminated in the recent exclusion of Telstra’s bid to tender for construction of a national fiber network and the government opting to go the process under its aegis.

The move has resulted in a $15 billion hit to Telstra’s value, the pushing out the door of Trujillo, and calls for reshuffling of the board, as early as this week. Sensing the shifting tide of the regulatory environment and Canberra’s attitude, shareholders no longer find appealing the notion of antagonizing government further with loud anti-regulation PR campaigns and are demanding a change in leadership and style.

Sol Trujillo (pictured) was the key proponent of Telstra's confrontational style of leadership

All of this is happening because government’s are reconsidering their approaches to regulation. Under facilities-based competition policy, they were comfortable sitting on the sidelines. Failure to see desired outcomes such as competition in deployment of new networks, combined with a global downturn resulting in companies spending less to deploy new infrastructure, has forced governments from the sidelines onto the pitch.

Telstra’s implosion is the story of a company blinded by arrogance. The hall of mirrors which leaders used to construct a false image of the company’s health has shattered as they now face battles on major fronts.

For operators in the Pacific, the lessons are to avoid antagonizing regulators, pick level-headed leadership, and strike a more cooperative tone with government. Not doing so might result in ending up in the mess that Telstra is in today.

Two more months and then we'll know what the beast looks like

Until the announcement on July 17th of the 2nd round of telecom sector liberalisation, we are like the people in this picture, only able to  guess at the parts of the elephant. We have already seen what competition in mobile means, and on that day, we will be given the road map for how Internet will advance in Fiji.

So, as we attempt to piece together what the elephant looks like, let’s take a look at what Dionisia has for us over at FijiLive:

The deregulation of international access, scheduled for July 17 this year, is phase two of the process. It will mean that any domestic reseller of telecommunication services may directly source its international bandwidth needs without going through FINTEL, as was previously the case.

Her article was very informative and helps us get a better understanding of how FINTEL is positioning itself with regard to future competition and government regulation.  By getting out ahead of government calls for liberalisation of the international gateway they hope to avoid more serious measures that government might push.

If regulators do not put a strong safety net in place, FINTEL will again make a meal of Internet consumers in FijiDoes this really mean anyone who wants to offer Internet service can purchase access to the international gateway by not having to deal with FINTEL? So long as there are guarantees that FINTEL will charge everyone the same price for access and act in a non-discriminatory manner toward network traffic.Can a leopard change its spots? The news is very promising. The change in rhetoric has been noted, but we can only be wary. We can only hope that those in negotiating power for the people are on knowledgeable of developments affecting regulation of telecom infrastructure in places like the UK and New Zealand (and now proposed in Australia).

What FINTEL understands is that there is a massive shift in attitutude on regulation of Internet infrastructure. Measures aimed at promoting facilities-based competition no longer hold sway. The new vogue is moving toward more interventionist policies, as governments now view broadband Internet access as critical national investments.

Dionisia’s article also had an interesting quote, which gives you the sense that they understand the larger context:

“The ultimate goal for the government is to make sure that we have a society that is well informed, knowledgeable and has access to information. How do you do that? Well you need internet penetration not just in urban areas but right out to the rural.  And our key strength, looking at the domestic market, is that we can work together with other key drivers to push bandwidth out there,” FINTEL chief executive officer Sakaraia Tuilakepa told Fijilive.

Let’s hope this tone is genuine and reflects only the beginning of positive news on the front of improving Internet access in Fiji. If the sentiment is not genuine and regulators are unable to put in place a strong vision, then Internet consumers in Fiji just might get eaten, again.

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What are the benefits of deregulation and increased competition?  From a New York Times article, here is what it has meant for Europe:

Half of the European Union countries could match the United States in broadband use by 2010, Ms. Reding said, if regulators take a tough stance to pry markets open. European Union broadband rates vary from 35.6 percent in Denmark to 7.6 percent in Bulgaria. The United States level was 22.1 percent as of July 2007, according to the Organization for Economic Cooperation and Development.

Ms. Reding emphasized her determination to encourage greater competition in the market and to give regulators the power to force “functional separation” — obliging the owners of telecommunications networks to free the networks from their operating divisions.

In seven member states, more than 60 percent of the broadband market is in the hands of incumbents, she said.

Ms. Reding adds, “The dynamic market force is new entrants”. 

Improving rates of broadband usage indicate many things, but as the article shows, it is increasingly a mark of how well-suited a country is as an investment destination.  Definitely something for policy makers to take note of in Fiji.  Higher levels of broadband internet usage are signs of an educated population with a sophisticated understanding of technology–very important to drawing overseas investment capital in today’s global economy.

The second article is also from the New York Times and deals with the setbacks cities in the US have faced in trying to set up free and/or subsidized municpal wifi networks.  The failure to get these networks up is an indicator of how it is important to have a clear business plan mapped out before deploying such networks.  Yet again, it is a call for business leaders and policy makers to sit down and really think about what deregulation and broadening access to technology means for Fiji.  It is also important to note that these efforts precluded use of WiMAX technology–something that gives Fiji a considerable advantage.

Currently, FINTEL is acting very much in the manner of the European monopolies.  Widening access to the internet, especially how it has been described on this blog means that policymakers will to pull themselves together and challenge the way things are being done.

What these articles have in common is growing acceptance of the idea that high levels of internet usage are good for a society.  Improved education levels, quality of life gains, increased suitability as an investment destination, and improved emergency communications are just some of the benefits of wider broadband internet usage by a population.