Telecom New Zealand

Infobox_Company
company_name = Telecom New Zealand
company_
company_type = Public
company_slogan = Connecting New Zealanders
foundation = 1987
location = Wellington, New Zealand
Auckland, New Zealand [ [http://www.nzherald.co.nz/category/story.cfm?c_id=49&objectid=10448770 NZ Herald 30 June 2007 - Telecom opts for tale of two cities] ]
key_people = Wayne Boyd, Chairman [ [http://www.telecom.co.nz/content/0,8748,200652-1548,00.html Telecom Board of Directors] ]
Dr Paul Reynolds, CEO
Mark Ratcliffe, CEO Chorus [ [http://chorus.co.nz/n92,4.html Chorus - Our People] ]
Matt Crockett, CEO Telecom Wholesale [ [http://www.telecom.co.nz/whstream/0,8768,203422-1000,00.html?nv=tp1 Telecom Wholesale - Welcome] ]
Russ Houlden, CFO
num_employees = 6,500+ in New Zealand
2,000 in Australia
products = Telecom
homepage = [http://www.telecom.co.nz telecom.co.nz]
industry = Telecommunications
revenue = NZ$5.6 billion (2005)

Telecom New Zealand (Nzx|TEL asx|TEL nyse|NZT) is a Wellington, New Zealand-based telephone company and, through its subdivision Xtra, an internet service provider. It has been run as a publicly-traded private company since 1990. It is also New Zealand's second largest mobile operator. Telecom is the largest company by value on the New Zealand Exchange (NZX) and movements in its share price have a great influence on the index of movements in the top 50 companies. Further, it is the 39th largest telecommunications company in the OECDcite news|url=http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10452483|title=NZ's wealthy telcos stingy on investment] .

Telecom was formed in 1987 from a division of the New Zealand Post Office and privatised in 1990. The selling price is still considered by many to be extremely low, given that Telecom had a monopoly of all phone lines in New Zealand at the time.Fact|date=June 2007 Some consider that the decision to privatise Telecom was a mistake & that it would have been better to keep Telecom as a government entity.Fact|date=June 2007 Others consider that the capital requirements to modernise the network were better provided by private enterprise than the government.Fact|date=June 2007

On 31 March 2008, Telecom was operationally separated into three divisions under local loop unbundling initiatives by central government - Telecom Retail; Telecom Wholesale; and [http://www.chorus.co.nz/ Chorus] , the network infrastructure division.

History

1987

* The New Zealand Post Office divests itself of the newly created Telecom which was created as a State Owned Enterprise (SOE) on March 31 1987.
* The Government-owned Telecom Corporation is to have a commercial focus. It purchases telecommunications assets of the Post Office for NZ$3.2 billion and work begins on improving the services and network.
* Telecom launches its 025 mobile network and TDMA mobile data network. The New Zealand telecommunications market is progressively deregulated.

1990

* Telecom is sold to two United States-based telecommunications companies, Bell Atlantic and Ameritech, for NZ$4.25 billion [http://www.telecom.co.nz/content/0,8748,200633-1548,00.html#20013149] . The two companies today still have part-ownership of the company Fact|date=February 2007.

* Clear Communications (now TelstraClear), begins the first network to compete with Telecom.

* The [http://www.med.govt.nz/templates/MultipageDocumentTOC____4213.aspx Kiwi Share] agreement is drawn up and part of this agreement retains free local calling for residential customers.

1991

* Telecom lists on the New Zealand, Australian and New York stock exchanges.

1992

* Roderick Deane is appointed CEO.
* Telecom implements a NZ$200 million dollar fibre-optic cable connection between Australia and New Zealand.

1993

* Ameritech and Bell Atlantic reduce their shares in Telecom to a combined 49.6%.
* BellSouth (now Vodafone) sets up the first mobile network to compete with Telecom.

1995

* Clear Communications reaches an agreement on local service interconnection.
* Telecom creates First Media Ltd to develop a cable television network across Auckland and Wellington, called First TV

1996

* Telecom establishes a telephone exchange in the United States for international traffic.
* Telstra New Zealand Limited (now TelstraClear) sets up operations in the New Zealand business market.
* Telecom launches an Internet Service Provider, Xtra, which is New Zealand's largest internet service provider today.

1997

* Saturn Communications Limited (now TelstraClear) enters the residential phone market in Wellington.
* Telecom buys back NZ$1 million of its shares.

1998

* Ameritech sells down its 24.8% shareholding in an international public offering.
* Bell Atlantic issues exchangeable notes that are convertible into the Telecom shares that it owns.
* Telecom celebrates 500,000 mobile customers connected to its mobile network.
* Southern Cross Cables Limited, half owned by Telecom, announces plans to build a fibre-optic cable linking New Zealand with Australia and North America.
* Vodafone New Zealand buys BellSouth and starts a campaign to attract Telecom customers to its network.

1999

* Telecom establishes a presence in Australia, buying 78% of AAPT, Australia's third-largest telecommunication company.
* Telecom upgrades its nationwide payphone network to smart card technology.
* Telecom's broadband Internet service based on ADSL technology, called JetStream, is launched and rolled-out progressively in local exchanges.
* Telecom begins charging customers who connect to the Internet using a local dial up number forcing all ISPs in New Zealand to change to an 0867 dial up number. Many consumers complain that this is in breach of Telecom's Kiwishare Agreement where residential customers are allowed free local calling.
* Theresa Gattung is appointed CEO of Telecom, with Rod Deane moving to the position of chairman.

2000

* Xtra signs up its 300,000th customer.
* Telecom Mobile, the mobile division of Telecom, celebrates 1,000,000 customers connected to its mobile network.
* The New Zealand Government conducts a comprehensive review of the regulatory regime.
* Telecom raises its AAPT shareholding to 100%.
* Telstra merges New Zealand operations with Saturn to form TelstraSaturn Limited.

2001

* The Government passes the Telecommunications Act, setting up a Telecommunications Commissioner.
* Telstra buys Clear Communications to form TelstraClear.

2004

* Telecom won the Roger Award for The Worst Transnational Corporation operating in New Zealand.

2005

* Telecom releases Bitstream, a 256kbit ADSL service sold at wholesale prices (at approximately 10% below the retail price) to other ISP's.

* Telecom's mobile customers find out that their privacy and security is not safe on the Telecom network, when a phreaker named ^god releases an exploit to the media allowing access to almost anyone's voicemail.

* Telecom posts a profit of $NZ 916 million.

2006

* May 3: The New Zealand Government announces that it will require Telecom to unbundle the local loop to provide "access to fast, competitively priced broadband internet". [http://tvnz.co.nz/view/page/411366/709992]
* May 4: NZ$ 1.1 billion of its market capitalisation was wiped off following the announcement. [http://www.nzherald.co.nz/section/story.cfm?c_id=3&ObjectID=10380243]
* May 9: An audio clip recorded on March 2 was released involving Telecom CEO Theresa Gattung admitting the use of confusion as a chief marketing tool in the industry. The March recording also dismissed the New Zealand Government as "too smart to do anything dumb" with regards to regulation. [http://www.nzherald.co.nz/section/story.cfm?c_id=5&ObjectID=10380894]
* May 19: A video titled "Telecon" incorporating the May 9 audio clip and a dubbed Telecom ad was released. Telecom got it removed from YouTube but it is still available at other locations. [http://www.nzherald.co.nz/section/story.cfm?c_id=5&ObjectID=10383435] [http://www.geekzone.co.nz/juha/550 Telecon commercial]
* Late May: Roderick Deane resigns as chairman, and is replaced by Wayne Boyd the following month.
* June 27: Telecom announces it will voluntarily separate its business into two operating entities - Wholesale and Retail. [http://www.telecom-media.co.nz/releases_detail.asp?id=3325&page=index]
* July: Matt Crockett is appointed CEO of Telecom's Wholesale division. [http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10389213]
* November 28: The Telecommunications Amendment Bill is introduced to split Telecom into three business units, with network access separated from the wholesale and retail units. cite news|url=http://www.nzherald.co.nz/section/story.cfm?c_id=3&ObjectID=10412818|title=Telecom's tough year continues - it's split into three]

2007

* January 16: The Librarians Association of New Zealand put in a complaint about a Telecom advertisement where 3 young school children state that, "Only dumb kids read books, brainy kids have broadband." Originally Telecom stated that is the views of the young children and not Telecom and the advertisement was unscripted, later that week Telecom choose to edit the advertisement to remove the comments made by the children.
* January 19: It is reported that [http://zoomin.co.nz/?search/index&type=ADDRESS&q=Paritai%20Drive%2C%20Orakei%2C%20Auckland&id=102%3A480%3A380%3A%3A Paritai Drive] , one of the richest streets in Auckland, is still not capable of receiving a Broadband DSL service and there are many other well populated areas around New Zealand still not capable of receiving broadband. Opposition Woosh Wireless immediately tested their service in the area and gave residents the opportunity to join their Wireless Broadband service. [http://www.nzherald.co.nz/index.cfm?objectid=10420956] [http://www.nzherald.co.nz/index.cfm?objectid=10420775]
* February 2: Telecom announces Director and CEO Theresa Gattung will be stepping down effective 30 June 2007 and a search for a new CEO will begin immediately. [ [http://www.telecom-media.co.nz/releases_detail.asp?id=3414 In the News : Telecom NZ Limited ] ]
* February 5: Telecom announces that from March 2007 they will begin rolling out ADSL2+, more than a year after originally stated for roll out.
* March 31: The 025 D-AMPS cellular network is closed down. [cite news |title=Goodbye to 025 network |url=http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10431887 |publisher=New Zealand Herald |accessdate=2007-03-31]
*April 1: All NZ telecommunications providers including Telecom introduce number portability.
*May 2007: British Telecom have been in discussion with the New Zealand government regarding Telecom's monopoly control of the NZ broadband network. Three to four years previously, British Telecom were in a similar position to that which NZ Telecom are now in; the British broadband network has since been broken up and the NZ government are keen to learn and possibly copy the development/regulatory/investment model used by the British firm.
*The Auckland Chamber of Commerce has publicly stated that if Telecom do not invest in a next-generation high-speed network, comparable with that of other Western nations, they will fund a private fibre-optic based service in the 100 megabit speed range. The proposed coverage of this would be within 200m of a path running south from Auckland CBD (situated to allow as many businesses as possible to connect). Any company or private individual within this range would be offered a connection.
* June 8: Telecom Mobile announces a plan to build a hybrid W-CDMA/UMTS-CDMA network [http://www.telecom-media.co.nz/releases_detail.asp?id=3455&page=1&pagesize=10&filtertext=UMTS&m1=1&y1=1996&m2=4&y2=2008&filter=filter] , based on the WCDMA HSPA technology, to eventually replace its current CDMA EV-DO network. This network will go online by the end of 2008.
*June 28: Telecom announces that Dr Paul Reynolds, then CEO of BT Wholesale has been selected to replace Theresa Gattung as the new CEO. His employment will commence on 27 September. [ [http://www.telecom-media.co.nz/releases_detail.asp?id=3459&page=index In the News : Telecom NZ Limited ] ] Simon Moutter has been appointed as acting CEO in the interim. [ [http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10448394 Telecom names new boss - 28 Jun 2007 - NZ Herald: New Zealand Business, Markets, Currency and Personal Finance News ] ]
*June 30: Theresa Gattung steps down with a reported leaving payment of $5.125 million in cash and 12 weeks annual leave owing. [ [http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10461941 Gattung's $5m golden goodbye - 06 Sep 2007 - NZ Herald: New Zealand Business, Markets, Currency and Personal Finance News ] ]
*September 27: Dr Paul Reynolds is sworn in as CEO of Telecom.
*November 21: Mark Ratcliffe, Chief Operating Officer for Technology, is appointed CEO of Telecom's soon-to-be spun-off network division.

2008

*January 16: Telecom announces the formation of [http://www.chorus.co.nz Chorus] , its new network infrastructure division. [http://www.nzherald.co.nz/category/story.cfm?c_id=59&objectid=10487239] [http://www.nzherald.co.nz/section/story.cfm?c_id=5&objectid=10487151]
*March 31: Telecom officially separates into three divisions ( [http://www.chorus.co.nz Chorus] , [http://www.telecom.co.nz/whstream/0,8768,203422-1000,00.html?nv=tp1 Telecom Wholesale] , Telecom Retail)
*April 1: Russ Houlden, a colleague of Reynolds at BT, is appointed Chief Financial Officer. He replaces Marko Bogoievski, who has joined Infratil.

Xtra

Telecom Mobile

Telecom Mobile is New Zealand's second-largest mobile operator, with about 49% [http://www.vodafone.co.nz/aboutus/12.1.1_facts_figures.jsp?item=facts] market-share, slightly behind Vodafone. Telecom used to operate AMPS, Digital D-AMPS/TDMA and currently operates CDMA. AMPS and D-AMPS service was sold under the 025 brand and CDMA services are sold under the 027 brand. Telecom turned off the 025 network on 31 March 2007 [http://www.telecom.co.nz/content/0,8748,205317-201933,00.html?nv=tpd] . Most of its customers had migrated to the 027 network. The 027 CDMA EV-DO network is marketed as T3G, a 2 MB third-generation mobile system.

On the 8 June 2007, Telecom announced a plan to build a hybrid W-CDMA/UMTS-CDMA network [http://www.telecom-media.co.nz/releases_detail.asp?id=3455&page=1&pagesize=10&filtertext=UMTS&m1=1&y1=1996&m2=4&y2=2008&filter=filter] , based on the WCDMA HSPA technology, to replace its current CDMA EV-DO network. The network is planned to go online in November 2008 [http://www.gsmworld.com/roaming/gsminfo/net_nzte.shtml] running at 850 MHz instead of the usual 3G 2100 MHz. Telstra's Next G (in Australia) and AT&T Wireless also have networks running on 850 MHz, which can cover greater geographic distances and penetrate buildings more effectively than higher frequencies. Current CDMA phones are guaranteed by Telecom to work until at least June 2012.

Customer numbers and market share

The following shows customer numbers and market share information for Telecom Mobile, including both the now-shut-down 025 network and current 027 network customers (these refer to Telecom Mobile's numbers starting with 025 and 027). Since Vodafone New Zealand took over BellSouth in the late 1990s Telecom's market share has dropped every year.

In 2005 Telecom launched New Zealand's first 3G network, using the brand name T3G. Being first into the 3G market, along with aggressive marketing and a $10 a month text message package, has allowed Telecom to claw back some market share from Vodafone. In November 2005 Telecom reported 72,000 new mobile phone customers, compared to 27,000 for Vodafone.

Telecom also has the advantage over Vodafone in phone number availability. Telecom Mobile's 027 network has 10 million numbers available, while Vodafone has only 3.4 million available.

Criticism

While there are now many competitors in the cellular, toll-call and internet markets, Telecom continues to be criticised for using its status as a former general monopoly to charge high prices whilst providing, in some people's opinion, poor service; On XTRA Broadband it used to cost over $1200 to download 100GB of data in a month, plus monthly access fees (at residential rates, business was more expensive). Prices have since dropped as competition in the broadband market becomes stronger (for example, residential and business can now have an unlimited data plan for $44.40). The unlimited plans have since been removed as Telecom found it was unable to deliver the speeds promised. Traffic management was meant to be applied over Peer-to-Peer and related traffic, but was instead implemented over all traffic. It has proved difficult for other companies to establish residential services due to Telecom’s control of local loop services. Telecom has also leveraged its control of residential services to establish the country’s largest ISP, Xtra

Competitors have alleged that Telecom engages in unfair practices to prevent them from gaining ground, for example by reselling broadband capacity to Xtra at lower prices than to other ISPs.

In July 2005, two dozen Internet service providers formally complained to New Zealand's Commerce Commission via a letter. [http://computerworld.co.nz/news.nsf/UNID/232444CFFD9ADC6ECC25703F0009B334?OpenDocument&pub=Computerworld] Notably absent from the list of signatories were Telecom’s ISP, Xtra, and several ISPs owned by its main competitor, TelstraClear.

On February 1 2007 the Consumers' Institute gave its "supreme ass award" for bad products to Telecom for its Xtra broadband service, Consumers Institute executive director David Russell claimed that since Telecom "unleashed" its broadband speeds, the institute had been "inundated with complaints of slower speeds and frustrating cutouts". [cite web | title = Supreme Ass Award goes to Xtra broadband | work = Stuff.co.nz | url = http://www.stuff.co.nz/northland/3946972a10.html | date = 2007-02-01]

Effects of monopoly

The New Zealand Treasury once estimated the economic loss from Telecom's (now former) monopoly to be in the region of $50–$250 million a year. Another study commissioned in 1998 by competitor Clear (now TelstraClear) estimated that the loss was $400 million a year. At a retail level Telecom now faces competition in all areas - cellular, internet, toll-calls and, subject to ongoing developments, in local calling. At a network level these retail services often resell Telecom wholesale products.

Telecom’s response

In [http://www.nzherald.co.nz/section/story.cfm?c_id=5&ObjectID=10351794 an article] published on 25 October 2005, Telecom claimed one reason for poor broadband uptake in New Zealand was because of the fact New Zealand residential subscribers enjoy free local calling. Telecom stated “customers have the option of moving to faster broadband services, but free local calling creates a disincentive by allowing them to use dial-up for as long they want” (i.e. they do not have to pay a per-minute call charge while using dial-up, unlike many other countries where local calls are charged for).However, some internet experts and competitors disagreed and even the secretary of the OECD [http://www.nzherald.co.nz/topic/story.cfm?c_id=363&ObjectID=10352757 took a shot] at Telecom.

Calls for change

Telecom failed to reach their self imposed goal of around 83,333 wholesale broadband customers by the end of 2005. During her opening address to parliament, Prime Minister Helen Clark criticised the state of the internet in New Zealand [cite news|url=http://www.nzherald.co.nz/section/story.cfm?c_id=5&ObjectID=10367253|title=PM joins critics of internet monopoly] . This was followed by extensive criticism in the media such as in two high profile television programmes, in two episodes of "Campbell Live" (whose major sponsor is Telecom), during which CEO Theresa Gattung was challenged by host John Campbell, and an episode of the New Zealand edition of "Sunday". Critical articles had been published by various magazines and newspapers, including the largest newspaper, the New Zealand Herald. Of significance, many of these were lengthy and high profile articles compared to many previous articles critical of Telecom — among the most noticeable of these was published by the "National Business Review", in which it was stated that “Far from being ‘Xtraordinary’, as its multimillion dollar advertising would have you believe, Telecom is strangling the nation’s advancement.". While in Wellington for an ICANN meeting, Vint Cerf was reported to have made a personal visit to David Cunliffe, the telecommunications minister where it is believed he recommended that Telecom be unbundled [cite news|url=http://www.nzherald.co.nz/section/story.cfm?c_id=3&ObjectID=10374148|title=Open up access, says 'internet evangelist'] [cite news|url=http://www.computerworld.com.au/index.php/id;1287275520;fp;4;fpid;78268965|title=Cerf wary of biased broadband business models] . The New Zealand Government investigated whether it needed to force Telecom to unbundle the network, thereby allowing other companies access and improving broadband service for consumers.

Local loop unbundling

In a decision by the New Zealand Government on May 3 2006, Telecom was forced to unbundle the local loop. This will allow competitors (such as TelstraClear, Orcon and Ihug) to offer broadband and other communications services throughout New Zealand by installing their own equipment in the exchanges. [cite news|url=http://www.nzherald.co.nz/section/story.cfm?c_id=3&ObjectID=10380108|title=Govt to open up Telecom network for faster broadband] [cite news|url=http://www.bloomberg.com/apps/news?pid=10000081&sid=aAkS5cuhU0uQ&refer=australia|title=N.Z. Says Telecom Must Give Rivals Greater Access to Network] The announcement of this decision was rushed ahead of schedule, as the documents were leaked to Telecom who advised the government of the leak. It was widely reported that the government had intended to make the announcement during the 2006 Budget. Most of Telecom's competitors and many independent commentators such as InternetNZ and Paul Budde have applauded the decision. Legislation has been introduced to enable the regulatory changes. Three other political parties, New Zealand First [cite news|url=http://www.scoop.co.nz/stories/PA0605/S00102.htm|title=NZ First Welcomes Telecom Competition] , the Green Party [cite web|url=http://www.greens.org.nz/searchdocs/PR9776.html|title=Government moves on Telecom welcomed] and United Future [cite web|url=http://www.unitedfuture.org.nz/press/show_item.php?t=0&i=1387|title=Copeland: Local loop unbundling decision a win for all New Zealanders] all supported the decision which would give the government at least 66 votes if there were no votes against the party line. The main opposition National Party initially opposed the unbundling decision, but later voted in favour of it after a select committee hearing. This left the ACT Party alone in opposing the decision.

Following the events of May 2006 the company was hit by a series of other decisions. Firstly, the Commerce Commission announced that it would rule on the contentious issue of mobile telephone termination charges. Then, in early-June, the Commission announced that calls between a landline and a mobile phone within a geographically defined boundary could be connected free of termination charges. The ruling allows Vodafone to establish a mobile phone product which can also provide free local calling, in direct competition with a product for which Telecom has long had a monopoly (The government, when it sold Telecom, enshrined free residential local calling as something it must continue with). Then, the Commerce Commission granted two of Telecom's competitors, CallPlus and ihug, access to an unrestricted, Unbundled Bitstream Service, which would allow them to provide competitive broadband services.

Finally, the company announced the voluntary separation of its business into two separate entities - Wholesale and Retail [cite web|url=http://www.telecom-media.co.nz/releases_detail.asp?id=3325&page=index|title=TELECOM TO SEPARATE WHOLESALE AND RETAIL OPERATIONS]

The Government introduced the Telecommunications Amendment Bill in November 2006 to force Telecom to open its network to competitors. The bill officially split Telecom into three business units from 31 March 2008, with network access separated from the wholesale and retail units.

References

External links

* [http://www.telecom.co.nz/ Telecom New Zealand Website]
* [http://www.xtra.co.nz/ Telecom's ISP Xtra]
* [http://www.chorus.co.nz Chorus - A Telecom New Zealand Company]
* [http://biz.yahoo.com/ic/48/48022.html Yahoo! - Telecom Corporation of New Zealand Limited Company Profile]
* [http://www.youtube.com/watch?v=E0oy1eiyOZY Telecon - Telecom Parody]