Commerce Commission issues sub-loop decision
18 June 2009
The Commerce Commission has today released its decision on the price and non-price terms on which Telecom must make the unbundled sub-loop services available to other telecommunications providers.
Telecom is currently in the process of deploying 3,600 roadside cabinets throughout its network, a process referred to as 'cabinetisation'. Cabinetisation involves shortening the length of the copper lines used to connect customers to Telecom's network by deploying fibre optic cable between telephone exchanges and roadside cabinets. Reducing the length of these copper lines enables faster connection speeds, which will allow for the delivery of new, faster services to customers. The availability of the sub-loop services will provide Telecom's competitors with the opportunity to also deliver advanced broadband services.
"Access to the sub-loop services will allow Telecom's competitors to take advantage of the shorter copper telephone lines that result from the cabinetisation process. This will benefit consumers by enabling higher broadband uptake and facilitating the deployment of broadband technologies which are capable of delivering new, higher-speed services," said Commissioner Anita Mazzoleni.
The equipment used to provide broadband services to cabinetised customers is located in Telecom's roadside cabinets, rather than its telephone exchange buildings. Sub-loop unbundling reduces the impact of 'stranding' of exchange-based broadband equipment installed by Telecom's competitors. Under the Commission's sub-loop unbundling determination, these competitors are provided with access to Telecom's roadside cabinets when cabinets are deployed in a particular area.
The Commission's decision covers the three unbundled sub-loop services - the sub-loop unbundled copper local loop service, the sub-loop co-location service and the sub-loop backhaul service. The sub-loop unbundled copper local loop service provides competitors with access to the copper line between Telecom's roadside cabinets and customers' premises and the sub-loop co-location service allows these competitors to locate equipment within Telecom's cabinets. The sub-loop backhaul service provides fibre transmission capacity between these cabinets and Telecom's local telephone exchange buildings.
The Commission has set a monthly rental charge that Telecom's competitors must pay for access to the sub-loop unbundled copper local loop service. The charge will be $11.99 per line in urban areas and $22.14 per line in non-urban areas. The monthly rental for the sub-loop co-location and sub-loop backhaul services will be calculated on a cabinet-by-cabinet basis.
The average cost of building a roadside cabinet is $972 per month. The Commission has decided that, for cabinet co-location, each party will pay a share of the cost of the roadside cabinet based on the proportion of occupied space that it is using.
The monthly rental to be paid by each party for the sub-loop backhaul service will be calculated based on the proportion of active fibres between the telephone exchange and roadside cabinet that it is using, plus the cost of Telecom equipment at the telephone exchange. The average cost of these fibre links is $1,911 per month in urban areas and $3,197 per month in non-urban areas. The cost of Telecom active equipment at the telephone exchange is $430 per month.
In setting the price terms for the sub-loop services, the Commission has balanced investment incentives of both Telecom and its competitors. Although the combined cost per customer for the unbundled sub-loop services is approximately 26 per cent higher than the corresponding costs for local loop unbundling, service providers will be able to provide customers with higher-value services over the sub-loop services.
The Commission's determination and related documents can be found on its website www.comcom.govt.nz under Industry Regulation/Telecommunications/Standard Terms Determinations/Sub-loop UCLL service
The Sub-loop Services. The sub-loop network refers to Telecom's copper network as it relates to the connection of local loops between the end-user's building and a distribution cabinet. This standard terms determination is for the following designated access services as they relate to the sub-loop network:
- Telecom's unbundled copper local loop network service (the sub-loop UCLL service);
- Telecom's unbundled copper local loop network co-location service (the sub-loop co-location service); and
- Telecom's unbundled copper local loop network backhaul (distribution cabinet to telephone exchange) service (the sub-loop backhaul Service),
The sub-loop UCLL service provides access to the copper lines between Telecom's distribution cabinets and end-users' premises. Access to the Sub-loop UCLL Service allows other operators to provide voice and broadband services to their customers using Telecom's copper telephone wires.
The sub-loop co-location service enables access to Telecom's distribution cabinets (or equivalent facilities) for installation of equipment, such as Digital Subscriber Line Access Multiplexers (DSLAMs), used to provide telecommunications services over copper lines.
The sub-loop backhaul service provides fibre-based transmission capacity in Telecom's network between the distribution cabinet and the local telephone exchange.
The sub-loop is a sub-set of the full local loop, which is the copper telephone line that runs from the local telephone exchange building to a customer's premises. The Commission previously released a determination for local loop unbundling (the UCLL Service) in late 2007.
Cabinetisation. Telecom is currently in the process of deploying 3,600 roadside distribution cabinets throughout its network (a process referred to as 'cabinetisation'). Cabinetisation is the basis for Telecom's 'next generation' fibre-to-the-node (FTTN) investment, and involves replacing the copper wires between its telephone exchange buildings and roadside cabinets with fibre optic cables. The cabinetisation process also includes moving some of the equipment used to provide telecommunications services from Telecom's telephone exchange buildings to these roadside cabinets.
As a result of the deployment of fibre within the 'access network' (between the distribution cabinet and the telephone exchange), cabinetisation reduces the length of the copper wire used to service an end-user. This facilitates the deployment of high-speed broadband technologies, such as ADSL2+, VDSL and VDSL2.
Stranding. Cabinetisation has the potential to lead to 'asset stranding' by causing the equipment installed in telephone exchanges (that is used to provide broadband services) to be made redundant. This is because cabinetised customers are no longer able to be served by this exchange-based equipment. Sub-loop unbundling reduces the impact of stranding, by enabling Telecom's competitors to locate equipment in Telecom's roadside cabinets when cabinets are deployed in a particular area.
Sub-loop UCLL Service
The recurring charge for the sub-loop UCLL service is to recover the cost of the copper lines between Telecom's distribution cabinets and end-users' premises.
The Commission has set a monthly rental of $11.99 per line in urban areas and $22.14 per line in non-urban areas.
Sub-loop Co-location Service
The recurring charge for the sub-loop co-location service is to recover Telecom's costs of building, installing and maintaining its roadside distribution cabinets. The average cost of a roadside cabinet is $972 per month.
The monthly recurring charge for co-location is to be calculated on a cabinet-by-cabinet basis. The access seeker must pay the portion of this cost that reflects the proportion of occupied space that their active equipments uses.
For example, if an access seeker is using 25 per cent of the occupied space in a given distribution cabinet, the access seeker will pay a co-location rental charge of $243 per month in respect of that cabinet.
Sub-loop Backhaul Service
The recurring charge for the sub-loop backhaul service is to recover Telecom's costs of deploying fibre optic cable between its telephone exchange buildings and its roadside cabinets. The average cost of these fibre links is $1,911 per month in urban areas and $3,197 per month in non-urban areas.
The monthly recurring charge for backhaul is to be calculated on a cabinet-by-cabinet basis. The access seeker must pay the portion of this cost that reflects the proportion of fibres it is using. In addition, the cost of Telecom active equipment at the telephone exchange ($430 per month) is also recovered by the monthly recurring charge for the sub-loop backhaul service.
For example, if the cabinet is located in an urban area and the access seeker is utilising 33 per cent of the fibres used between the cabinet and the local telephone exchange, the access seeker will pay $630.63 ($1911*33%) for fibre-related costs and $430 for the active equipment. This results in a backhaul cost of $1,060.63 per month.
Standard terms determination process
On 22 December 2006, the Telecommunications Act 2001 was amended to incorporate a process for the Commission to make a standard terms determination on which a designated access service or specified service must be supplied by an access provider to any access seekers requesting the service. A standard terms determination for a designated service will include:
Ãƒâ€š ¡ non-price terms set by the Commission after considering the access provider's standard terms proposal; and
Ãƒâ€š ¡ price terms for access to the service, set by the Commission.
It is intended that a standard terms determination should be comprehensive enough and contain sufficient detail so that there is no need for an access seeker and access provider to enter into a separate agreement for provision of the service within the specified timeframe.
The Act specifies that the following steps must take place before a standard terms determination may be made by the Commission:
- Initiation of the determination process
- At least one scoping workshop
- Commission issues notice to an access provider requesting a standard terms proposal
- Access provider submits a standard terms proposal
- Submissions on the standard terms proposal
- Commission issues draft standard terms determination
- Submissions on the draft standard terms determination
- Commission issues standard terms determination
A brief overview of the key steps in a standard terms determination process is available on the Commission's web site under Industry Regulation/Telecommunications/Standard Terms Determinations