Telecom CEO Paul Reynolds answers questions

Over at Geekzone Mauricio collected a bunch of questions for Telecom CEO Paul Reynolds. Today the answers came through and Mauricio has posted them – check them out.

Kudos to Dr. Reynolds for answering a substantial percentage of the questions posed. I for one posed 5 questions, and they were all answered:

Network/Investment
Q. What is your and Telecoms NZ’s position in the net neutrality debate? – Vint Cerf has praised the UK/NZ wholesale/retail separation models, but other commentators have said that the UK model has resulted in higher costs to the consumer. (via Dave Farber’s IP list). How will you work to ensure that prices to the NZ retail and wholesale consumers are low in international terms while providing a fair return to shareholders?

Dr Paul Reynolds: Net Neutrality is a very broad term that there is still much debate about – I’m not sure which definition you are asking about, so I’ll attempt to answer your question as best I can. The first point to make is that Telecom, unlike some of the US cable companies is not vertically integrated as a content and internet access provider, so we don’t have the same motivation to prioritise our content traffic ahead of other traffic, the model that has caused the debate in the States.

Where I think we have to see some intelligent management of packets is as Telecom provides the infrastructure and products at a wholesale level for VOIP, and future IP products, whatever they may be. For VoIP to be compelling it can’t just be a best efforts product – there have to be versions with a Quality of Service dimension.

I think we will also see more innovation at a Retail level in offering differentiated IP-based products. But I can say that at no stage will Telecom stop anyone from using their internet connection how they choose, assuming fair compensation.

Regarding pricing – I think it’s really important that we get the right regulatory framework for IP-based products that allows for competition and innovation, speed to market and customers being able to decide what they value.

A lot of this will be decided by the decisions that the regulator makes on IP interconnection – an area which has yet to be regulated anywhere in the world. New Zealand is going first – as we are on many issues. We are advocating that IP interconnection prices are not set by the regulator, but that consumers drive the pricing by voting with their dollars.

We feel that setting a base cost for IP services naturally leads to a commoditised market and slows innovation and investment. I’m backing Telecom’s retail business to deliver the best products with the best value proposition on a totally level playing field, and that will deliver value to our shareholders.

Mobile/Voice
Q. International mobile data roaming charges are ridiculously high – to the point where using mobile data internationally is just not viable. What is Telecom NZ doing to encourage all telcos to reduce roaming charges to sensible numbers?

Dr Paul Reynolds: International roaming charges are closely guided by agreements with overseas mobile providers and while a premium service, Telecom’s data roaming prices are competitive with other New Zealand and international mobile providers. However, our new mobile network will provide opportunities for us to partner more effectively with overseas mobile providers. Our aim will be to offer best value for Telecom’s customers.

Broadband
Q. We are still largely constrained by broadband bandwidth caps in NZ, which restricts the business models that our developers and consumers can participate in. What will you do to unleash the full internet and reduce the constraints from bandwidth caps?

As a small English speaking country, the majority of our content is generated in the US and Europe, and needs to be transported all the way to New Zealand. This is expensive and at present it would be unsustainable for us to remove data caps altogether. It’s simply a matter of distance and demand. We do, however, have a range of plans that allow customers to choose either a fixed price or overage depending on their needs. We should bear in mind than the OECD estimates New Zealand has the 6th cheapest broadband services in the world. Not bad considering the huge extra network costs we face as a result of our remoteness, small population and challenging local geography!

Vision
Q. Moore’s law and Metcalfe’s law dominate your world. Paint for us your vision of how telecommunications will look in 15 years time. (Is data access ubiquitous? What are the revenue models? How is Telecom NZ adapting to an end game where data access is like electricity?)

I think fast broadband data access will be ubiquitous and we’re heading there quickly with 10-20mbit broadband to over 80% of New Zealanders in the next 2-3 years. Also fast 3G mobile data will be available to 97% in the first half of 2009.

The revenue model is pretty straightforward: investors need regulators to set prices for regulated wholesale services that ensure a reasonable return, in order to continue to incentivise the investment. I note that in many other countries regulatory holidays or closed platforms has been the price of fibre investment. We’ve avoided that so far here in New Zealand, but it is absolutely certain that sensible pricing will be a pre-requisite to get New Zealand ahead and stay ahead.

Retailers, including Telecom, will win by being agile and innovative in developing new services on open access platforms. The future will see much less emphasis on operators developing and selling closed applications. I see Telecom Retail combining capabilities, written in software, with applications and services developed by others and bringing them together in unique and valuable packages for customers. Customers will drive the agenda. They will have real choice and will naturally buy from those that best meet their needs.