Overview of Telecom’s structural
separation proposal
Regulatory
principles
• The purpose of regulation in telecommunications is to manage competitive
access to economic bottlenecks and to address potential problems arising
from limited competition.
• The Telco Act’s purpose is to promote competition for the long‐term
benefit of end‐users. There is an inherent tension in this principle between
promoting competing and promoting investment.
• Good regulatory practice requires regulation to be rolled back when the
reasons for introducing it no longer apply: either market competition
improves, or assets are no longer an economic bottleneck.
• Taken together, UFB and Telecom’s structural separation change the
playing field so significantly that we need to take a fresh look at what
Importance
of
regulatory
reform
• The existing multi‐layered regulatory structure needs to be simplified and
some of the inconsistencies dealt with.
• UFB establishes a new industry model focussed on a migration to fibre‐
based delivery. It’s important to set the new model up for success.
• At a high‐level it is important to align the industry models for fibre and copper, and therefore the approach to regulation.
• Telecom has offered structural separation as an alternative to operational
separation.
• The structural separation of Telecom also requires a fresh look at the
approach to regulation of copper‐based services, including the TSO,
Why
is
Telecom
considering
a
split?
• The government’s Ultra‐fast Broadband (UFB) initiative sets out a new
vision for the telecommunications industry in New Zealand.
• It envisages a new access network company or companies that are focused
on delivering fibre optic access infrastructure, and are separate from retail
companies that sell services to end users.
• Telecom’s national UFB proposal includes an offer to split into two
separate companies, consistent with this model.
• In this presentation we outline what we mean by structural separation and
What
does
structural
separation
mean?
• Structural separation means that two entirely separate companies would
replace Telecom as it exists today. The two separate companies would be:
– Chorus2* – A nationwide fixed line access network infrastructure
operator that will offer services to retail service providers on an open
access basis. Essentially, Chrous2 will be similar to the existing Chorus
business with the addition of layer 2 services (copper and fibre) and
related assets.
– ServCo* – A retail focused telecommunications business comprising
Telecom’s fixed, mobile and ICT businesses. ServCo will build and
deliver services to end users using the Chorus2 network, just like every
other retail service providers. It will also wholesale some services and
own mobile infrastructure.
What
does
structural
separation
mean?
• Assets, systems, services, people and everything else in Telecom today
would be split between the two companies.
• Under the proposed structure any dealings between the two companies
would be formalised in arms‐length commercial arrangements as occurs
between any other companies.
• Each company would have its own board of directors, CEO, management
team and employees, and would be separately listed.
Chorus2
• Under Telecom’s structural separation proposal Chorus2 would:
– Provide nationwide access services to all retail service providers on an
open access basis;
– Offer both layer one and layer two services on copper and fibre;
– Offer regional backhaul services;
– Manage the migration of customers from copper to fibre in a way that
minimises disruption and drives fibre uptake;
– Be forbidden from moving downstream and operating a retail
telecommunications business;
ServCo
• Under Telecom’s structural separation proposal ServCo would:
– Purchase Chorus2 services like any other retail service provider and
compete on an equal footing with all other retail service providers;
– Provide fixed line access and calling, broadband, mobile and ICT products and services to business and residential customers;
– Provide some wholesale services to other retail service providers;
– Offer national backhaul services;
– Own and manage its own mobile telecommunications network; and
Asset
Splits
• The demerger process to split into two separate companies would involve
allocating ownership of all Telecom’s current assets and systems to either
Chorus2 or ServCo.
National backhaul Regional backhaul
Mobile network, PSTN and other
service platforms (e.g. messaging) Layer 1 assets – copper, fibre,
physical plant, most exchange
buildings
Ethernet aggregation* Layer 2 assets – DSLAMS and most
other access electronics
ServCo Chorus2
Transition
of
Services
UCLL UCLL Co-lo UCLL Backhaul SLU Co-lo SLU Backhaul SLU UCLL Enhanced ServicesRadio Comm (non-mobile) Co-lo
Commercial Co-lo & Backhaul
FTTP Access Service HSNS & UPC Wholesale VDSL2 Service UBR Backhaul UBS UBA
Tail Extension Service
IP Interconnect Resale UCLL UCLL Co-lo UCLL Backhaul SLU Co-lo SLU Backhaul Enhanced Services
Radio Comm (non-mobile) Co-lo
Commercial Co-lo & Backhaul
FTTP Access Service
HSNS & UPC
Wholesale VDSL2 Service
Local Backhaul
Naked UBA
UBA + POTS Bundle
Tail Extension Service IP Interconnect PSTN Access Chorus Tel e co m W h o les a le Tel e co m To day Se rv C o Ch or u s2 Demerger SLU UCLL
What we’d like to know from our customers
• What works well with the current regime
• What isn't working well and needs fixing
