When predictions come unstuck

Our page 1 telecomms unbundling story was an attempt at recording in advance what everyone assumed would be formally announced a week or so after our publication date: that telecomms commissioner Douglas Webb would be recommending to the government that it end Telecom’s local loop monopoly.

TUANZ head Ernie Newman told us he’d already “ticked unbundling off the to-do list”, and he was 95% sure the government would go along with Webb's expected unbundling recommendation. A range of others – CityLink’s Neil de Wit and ICONZ’s Sean Weekes – sounded equally sure that unbundling was a fait accompli.

It was an apparently safe bet given that Webb’s preliminary report, released in September, came down in favour of unbundling. But by late December, after sitting through a conference of interested parties and poring over a fresh pile of submissions, the “substantial net benefits” of unbundling cited in Webb’s September draft had shrunk to an anticipated mere $5 million boost to the national economy. In contrast, his surprise recommendation of the imposition on Telecom of a DSL wholesaling regime would be worth $70 million.

What a turnaround. Newman and cohorts can be thankful they didn’t promise to eat their hats, or anything more drastic. And the rest of us can only hope that Webb has got it right. There is certainly plenty of scepticism in the air. Even the

Fanning the flames was Telecom’s announcement, exquisitely timed for the holiday period when no one was paying attention, that it was lifting line rentals. TelstraClear, with its hopes of unbundling freshly dashed, seized on Telecom’s sly price rise, calling it “shameful”. In a press release, it rightly pointed out that where Telecom has local calling competition of the kind unbundling should bring more of – in Wellington and Christchurch – its subscribers pay 25% less for phone lines than subscribers elsewhere.

Webb is assuming the country will benefit more from accelerating the rate of broadband internet uptake than from lowering the cost of local voice calls. He does so on the basis of submissions from wireless network builders Woosh and BCL that they will provide Telecom’s voice competition – but only if unbundling doesn’t proceed; if it did proceed, their wireless network investments would be harmed, they told the commissioner.

In the end, the government will decide what happens, after a fresh stack of submissions has been processed. If it follows Webb’s recommendation, it will put the country in the position of pioneer. Nowhere else has unbundling been eschewed in the expectation of wireless voice services successfully competing with wireline. Given that, I think everyone concerned can be excused for fluffing this particular prediction.

To show that one setback isn’t going to deter us from all crystal ball gazing, we’re willing to go on the record with another wild guess: offshoring will become a local talking point this year. It already has in the US and UK, where there’s growing disquiet about exporting IT support and development jobs to India and elsewhere. (Ever notice how quickly the free market champions start complaining when their jobs and markets are eaten into by globalisation?)

Look out for a concerted push by New Zealand’s IT industry to start capturing some of this work. And a fine idea that would be, too.