TUANZ has been the user’s voice for over 20 years, and for half that time it’s been led by chief executive Ernie Newman. His colourful advocacy has been both welcomed and feared by the telecommunications industry. TR editor Sarah Putt, who worked for TUANZ from 2006 to 2008, interviews her former boss.
Q: TUANZ fought hard for a national fibre network, but the way it’s shaping up is a showdown with Telecom on one side and the government on the other – a fair assessment?
A: I think the world has changed its view and that societies are unwilling to accept the use of natural monopolies of infrastructure for vertical integration in downstream markets. I think that has accelerated in the last couple of years, and our government has read the tea leaves correctly and seen the transition from copper to fibre as the right moment in time to cement that principle in New Zealand.
Telecom to a degree has been caught because of transition in economic and political thinking.
Q: Where do see the future for Telecom in a Crown Fibre Holding model?
A: There’s a future for Telecom as a very experienced, very competent infrastructure owner and separately as a retailer as services, but it cannot combine the benefits of the two.
Q: You’re suggesting structural separation as the best way forward?
A: That’s a Telecom board decision, but I think over time that may be their best way forward. They have great capability in infrastructure and in offering retail services, and the question is whether each of those units independently can survive on its own two feet without the vertical integration. If the answer is yes, then probably structural separation at some point is inevitable; if the answer is no, then the way forward is clearly in Telecom’s board’s hands.
Q: Could Telecom go head to head with Crown Fibre Holdings in a competitive services world?
A: Telecom could gain short-term advantage from doing that, but governments are elected by the community. They are the agent of the community, and if you go against the government you go against the community, and that cannot be a viable long-term strategy.
Q: Do you think this National government has the stomach to go to war with the country’s second largest listed company?
A: I think this government has more stomach than any government in my lifetime.
Q: You fought hard for LLU, and we’re now starting to see some competition in the wholesale market – TelstraClear, Vodafone, Orcon. Would you like to have seen more investment from Telecom’s competitors, or do you think it’s about right?
A: Cabinetisation got in the way of LLU and that was timing, and I don’t think that the number of unbundled lines is necessary the determinant.
You could argue that even if not one line is unbundled, the fact that the incumbent knows it can be has the effect over time of altering its behaviour. You can have very successful policy changes from unbundling without that necessarily reflecting on the number of unbundled lines.
Q: We’ve only see three players take advantage of unbundling: Vodafone and TelstraClear, and government-owned Orcon. What’s your view on Orcon by the way – do you think an SOE should own it?
A: I was always surprised that a government-owned entity would invest in what was at that point the most competitive part of the market. Having said that, it’s the choice of Kordia’s board and depending on the mandate the government gives it. I think Orcon is a very competent ISP.
It will be very interesting to see over the next couple of years just what approach the government takes to the running of Kordia in this industry.
Q: Kordia’s everywhere – it’s got Orcon at the services layer and now it looks like it’s going to lay an international cable. What’s your view on that?
A: I will go down on my knees and give thanks to anyone who brings more international connectivity to New Zealand because I think we need that for security and redundancy and I’m not going to be overly precious about who that might be.
Q: Let’s talk about mobile, because it’s been a big year in that space too. TUANZ has been a real advocate of lowering mobile termination rates – why did you feel the need to go in with 2degrees and Federated Farmers, etc. in the Drop the Rate Mate campaign? Why couldn’t you just stay on your own? How does it sit with you to be aligned with a telco that is fighting tooth and nail for market share?
A: TUANZ fights issues; we don’t fight for or against companies and we certainly don’t fight for or against people. We have an established record since 2003 of fighting the issue of MTRs. If some other company or organisation comes along with a common interest in that and there is sufficient commonality of purpose to justify our being part of strength in numbers, then we very happily do that.
Q: Do you think that Vodafone might think differently – that they might see you aligning your organisation with a company that is aggressively going after their business?
A: We’ve aligned ourselves with Vodafone on issues like TSO; we decide on the issues that we wish to fight as a matter of principle and we gather bedfellows around us as appropriate to that issue. It doesn’t mean that we are in favour of or against any telco or any other business organisation.
Q: Is Vodafone still a member of TUANZ?
A: Not at the moment.
Q: Would you like them to be?
A: Yes.
Q: Why aren’t they members?
A: You’ll have to ask them, but carrier membership is always a fraught area. Every one of the three major carriers has been in and out of TUANZ in the 10 years I’ve been around. On the one hand we have a lot in common with the carriers – we want to see telecommunications become a larger and more significant part of this country’s economy. On the other we are not going to see eye to eye on certain issues and there’s going to be times when there’s a fierce divergence of views, and occasionally that’s meant they’ve left. In the past they’ve tended to come back, and there’s a warm welcome waiting for Vodafone and TelstraClear.
Q: So TelstraClear isn’t a member – you’ve only got Telecom out of the three major carriers. What about membership overall: where does that stand?
A: From memory 460, which is within plus or minus five percent of where it’s been in the last three years. The impact of the recession on numbers has been minimal.
Q: What can TUANZ offer members? There used to be a bi-monthly magazine and a series of events, but the events are now run under a different organisation.
A: The magazine is still there in the form of freely available blogs and membership information which is password-protected. The events in the main are still there; certainly the After 5s is there and it’sfizzing. Our Innovation Awards and Rural Broadband Symposium both went extraordinarily well for 2009.
They were joint ventures between us and IDC, fundamentally so that we had the financial strength to be able to make the upfront investment in running them without risk to ourselves or sponsors or other stakeholders. But they remain to all intents and purposes a TUANZ event, with the added strength that IDC can bring them.
Q: So will that relationship continue?
A: Yes, it will certainly continue for things like the Innovation Awards in 2010; we’re already well down the track. The Telecommunications Day is something TUANZ will continue to run on our own for April 2010, and regarding the other events we’re still assessing the market and deciding what we want to do.
We still have a very strong wish to get more heavily involved in the applications of ultra fast broadband, and we want to stimulate strategies and visions for a number of key sectors: education and health, rural NZ, SMEs, energy, environment. I see that as central to our policies going forward and central to our ongoing events programme. But just how that will play out in detail we haven’t worked out.
Q: How can you do all that with just two and a half staff, including you?
A: At the moment we are at the bottom of the trough and I will be amazed and bitterly disappointed if we didn’t see some rebuilding during 2010.
Q: Are you disappointed in the way things have gone for TUANZ?
A: Hell yes, 2009 was an appalling year, but it was induced by the recession, it wasn’t induced by anything we did. The really great thing about it is that our members have stuck by us. Association membership is always a touchy item in a downturn, yet the vast majority of our members have stood by us.
Q: There’s a view in the industry that you’ve always been an outspoken commentator, but your rhetoric has become more colourful. As your business model has faded you have measured relevance in column inches. Is that fair?
A: No, I don’t it’s fair to generalise that our business has declined. One part of our business has been pulled back – the events business. I don’t think we have become more colourful, I think we try to be measured and fair. If we become shrill and unbalanced, then very soon the media won’t want to hear from us, and the media still want to hear from us. I think if anything we’ve pulled back, because a lot of the change we’ve sought, we’ve now achieved and we’ve gone out of our way to welcome good behaviour, welcome good outcomes and express things in the positive.
Q: So what’s the relevance of TUANZ if you’ve achieved everything you set out to achieve?
A: Because what we have achieved now is a national plan for a huge investment in fibre to the premises. Now it’s up to us to make damn sure through our members that as it comes on stream, New Zealand picks up the opportunities it offers and is ready for that fibre as it gets out there.
Q: You’ve been at TUANZ 11 years; do you think there’s a key person risk? That TUANZ is Ernie, and Ernie is TUANZ?
A: I think there are some people who would like to position it that way because when I get hit by the proverbial they can say the organisation is over. But I absolutely reject that; we have an extraordinarily capable board of 11 from around the user community, and we have had and will rebuild with some really top-notch support staff. I personally go out of my way to try and share the visibility, but at the end of the day media tend to like one spokesperson for an organisation.
This organisation has endured for 12 years before I came along and it will endure for a lot longer after I move on.
Q: Looking ahead what are your predictions for 2010?
A: There’s going to be vast change. 2009 was big for change, but 2010 is going to be bigger. There’s going to be enormous excitement around the fibre. Some of the companies that were running scared of fibre in 2009, such as Telecom, are going to embrace it more and recognise there’s been a societal change, and in fact monetised over a period of time a number of options have been clarified.
Q: They would say the future is mobile.
A: The future is both mobile and fibre: fibre for the bulk carriage and mobile for premium.
Q: Any other predictions?
A: I think we’re going to see over a period of time customers spend more on telecommunications but get vastly more for it. Telecommunications is going to be substituted for transport, for entertainment, for all sorts of other things – it’s going to draw money from other parts of the household and business budget. It’s going to be a very profitable industry to be in over time. But it’s only going to be profitable for those who have the wisdom of Solomon and can position themselves as contributors at the forefront of change.
Q: Just reflecting on the interview, it’s interesting that it’s been about regulation and infrastructure and the telcos’ business case, and yet you represent business users and you’re only just starting to talk about them now. Is that the role of TUANZ?
A: I don’t think that’s correct; I think I’ve several times referred to the transformational role of fibre in terms of the economy and society, that’s from the user’s point of view. TUANZ is not about regulation; TUANZ is about the maximisation of telecommunications for economic and societal good. Now sure, in the last decade we’ve had a tremendous amount of involvement in regulation because that was the issue that needed to be fixed in the industry. To a very large extent that is now done, so that’s why we will move in the next couple of years to how to use this stuff, as distinct from getting the industry environment right.
Q: Our readership for TR is primarily CIOs and IT Managers – what is the future for them in 2010?
A: They already in general have quite good connectivity; certainly in the metropolitan areas. The big change for the CIOs is going to be that their customers will have better connectivity and that will open the way forward to transact a lot more business online, because that is the most cost-effective channel, and to find all sorts of productivity and efficiency gains for their business. So it will be a really exciting time for the switched-on CIO.
Q: Thanks, Ernie.
A: That’s alright, but can I say you might want to reorder that because I don’t think you’re right in saying that the whole interview is about regulation; because those issues about what we’re going to use it for are not regulatory.
Yes we’ve been regulatory junkies for the last 10 years because there’s been so much unfinished business, but that’s now ticked off and we’re looking at how to use this stuff. That’s the sort of theme I would like to have come through and I think it’s there but you might want to re-sequence it a bit. Not that I would ever presume to tell you your job, Sarah!