Participation in the Government’s Ultra Fast Broadband program means change for Telecom New Zealand, and change for the industry as a whole. Once separated, the industry loses a dominant, vertically integrated retail carrier and moves to a market structure where all telecommunications products will be built from components offered by separate commercial entities.
The diagram below shows transit, national backbone, and last mile options available for companies participating in a post-separation world. A competitive retail provider such as Snap will require a relationship with a transit provider, a national backbone provider, and a last mile provider in each market they want to compete in. Alternatively they could approach a company such as TelstraClear for integrated National Backbone + Last Mile products, or Telecom for integrated National Backbone + International Transit products. TelstraClear, with their strong buying power on Southern Cross Cable, and extensive Wellington and Christchurch HFC networks, remains the only provider with a near vertical approach to some markets.
This new regime should increase competition – especially in larger markets. The table below shows that eight of the top ten larges markets in New Zealand will be serviced by at least three national backbone providers and three last mile providers. In the Auckland CBD, four metro fibre networks are available today. Wellington and Christchurch have three extensive metro fibre networks each. Competition does tail off steeply in markets of fewer than 50,000 people.
In the table below, NB = National Backbone; LM= Last Mile; TNZ = Telecom New Zealand (Telecom 2); FX = FX Networks; CH2 = Chorus 2; TCL = Telstra Clear; and ALT = Alternative Provider, such as a lines-company fronted local fibre company.
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With the dominant retail player about to be on an even footing with competitors when purchasing last-mile services, in 2012 you should expect retail products to change, and strong competition to emerge – especially in larger markets.