The break up of AT&T in 1984 led to a seismic shift in telecom policy and regulatory thinking worldwide and also created the conditions for the Internet boom. New Zealand is a small country quite unlike the US, but it has taken an unprecedented step that has the potential of changing policy and regulatory thinking again. As the excerpt below says, the split is on the lines of the BT reorganization in the UK. That is true. But the key difference is that BT reorganized voluntarily and NZ Telecom, not.
If I were managing an incumbent telco, claiming dominance in various markets and providing poor broadband service, the NZ decision will give me nightmares; but more than that, it will cause me to seriously consider BT type voluntary reorganizations.
Telecom, long accused of using its dominant position to stifle competition, will have to break up into wholesale, retail and network operations.It will have to give competitors access to its network linking New Zealand’s 4.1 million people at the same price it will charge its own retail arm. The government said the split should be completed by the end of March 2008.
“It will underpin increased competition and efficient investment for the long-term benefit of all New Zealanders,” Communications Minister David Cunliffe said.
Incentives for Telecom to develop its network should increase Internet speed and capacity, he said.
The government first signalled it wanted a split last year after it expressed frustration at the slow take-up and expensive charges for broadband Internet.
Competing Internet service providers (ISPs) have complained that Telecom’s monopoly position in the network has hindered the introduction of faster and cheaper Internet services.
The government had already ordered Telecom to open up access to its network to competitors and the operational separation is intended to make its network operations more transparent.
The restructuring is similar to the split carried out by BT Group (British Telecom) last year and the New Zealand company’s incoming chief executive Paul Reynolds is a British Telecom veteran.
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