Rebate for DSL outages the right move, analyst says

Telecommunications analyst Paul Budde says Telecom New Zealand Ltd. could learn a lesson from Telstra Corp. Ltd.'s decision to reimburse customers in Australia whose DSL (Digital Subscriber Line) service was cut for 12 hours last week.

Telstra's network was down across New South Wales state and parts of the Australian Capital Territory and involved tens of thousands of customers, all of whom are eligible for a 10 percent rebate on this month's bill.

Telecom NZ's general marketing manager Kevin Kenrick says Telecom has a sliding scale of responses depending on the price point of the service and the expectations that contains.

"Obviously dial-up customers are going to have a different level of service to a managed virtual private network solution with high service level agreements."

Kenrick says Telecom will judge any customer requests for compensation on a case-by-case basis should the need arise.

"We're learning about what service levels are appropriate for each offering and that's an ongoing process."

Last week Telecom suffered a major outage on its DSL network, cutting off customers in Wellington and the South Island for several hours. Problems with Telecom's usage meter and with quality of service issues have plagued the company since it launched JetStream in 1999 and users have consistently blamed the pricing model as being prohibitive to real use of the service.

Budde says Telstra recognizes broadband is the future of telecommunications.

"They've realized that instead of mobile technologies, like 3G, being the future, it's in broadband instead. Finally they're getting serious about broadband and have invested $A1 billion (US$540 million) so the other telcos are paying attention as well."

Budde says Telecom has not realized this and is yet to put serious effort into broadband initiatives, although he hopes this is changing.

"There's no real competition to spur them on. You need competition on the network, not between networks as TelstraClear is proposing to make it work. Telecom will be reluctant to move towards allowing more competition on its network because it will be cannibalizing its own high-value customer base in the form of its over-priced public data networks, like ISDN and leased line business."

Budde says Telecom can ill-afford to lose revenue at a time when it's posted its first loss.

Telecommunication Users Association (TUANZ) chief executive Ernie Newman says he would rather see money spent on ensuring the service worked than have customers reimbursed for outages.

"Surely in this day and age such problems should be a rarity on the network?"

Budde says New Zealand is falling behind Australia in the broadband stakes -- despite being on a par with it only a year or so ago.

"Since then with Telstra jumping on the broadband wagon in such a big way driving take-up of the service, New Zealand has fallen further and further behind."

Telecom claims to have 20,000 residential users signed up with JetStream while Telstra in Australia is claiming to sign up 20,000 customers per month. Overall, including business customers, Telecom has 45,000 DSL users.

Budde says the argument that lack of content is keeping customers away is spurious and is simply an excuse on the part of the telcos.

"There isn't any content anywhere in the world. There isn't more content for broadband in the U.S. or in Korea, but they have much higher take-up rates than New Zealand. It's an argument Telstra tried to make as well in the past and it just doesn't stack up."

However, Budde believes having government support for broadband is a vital driver in the New Zealand market.

"Without competition we need to find a driver somewhere else and the government is doing a marvellous job at that -- Paul Swain (Minister of Communications) and Prime Minister Helen Clark are both championing broadband and forcing the telcos to move forward."

Budde believes the New Zealand government is more progressive than Australia's, but that it will still cost around $NZ1 billion (US$464 million) to get all of New Zealand on to a broadband platform.

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