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IDC: RBI open concerns valid

07 Feb 2011

Speaking on today’s announcement that the government picked Telecom and Vodafone joint RBI bid, IDC says the government opted for a pragmatic outcome.

Earlier today InternetNZ Chief Executive Vikram Kumar was quick to express his concerns about the decision: “Today’s announcement reinforces serious concerns about the future of a competitive communications market in rural areas.

“The open access obligations that have been proposed are, like those set out for the Ultra-fast Broadband Initiative, far from strong,” he continued. “This will unfortunately limit retail service providers’ ability to compete with the infrastructure providers themselves, who are also the major retail providers in rural areas.”

IDC Senior Analyst, Rosie Spragg, says that the concerns expressed in the industry about fair access are valid.

"Historically, telecommunications carriers have faced significant challenges in the rural sector. To some degree this reflects the difficulty of the investment business case in rural New Zealand – scale, and with it the ability to cross-subsidise between more and less profitable customers, is crucial," Spragg said.

"It is this challenging business case that the government has sought to support through the RBI. The government has made no secret of the fact that is seeking to maximise its 'bang for buck', unsurprising given the limited funds available, most of which is sourced via an industry levy.

“It appears the Telecom and Vodafone bid has met the government's expectations in this regard,” Spragg continued.

"There is limited information on what the open access provisions are going to look like in any detail, or whether there will be opportunity for input from competitive carriers before the contracts are finalised. This is making informed debate difficult."