The Commerce Commission today finalised its first review of backhaul services. Backhaul is the final link connecting competitors' networks to Telecom's local loop, so those competitors can provide services such as landlines and broadband to consumers.

The review concludes that four routes that the Commission had previously expected to be subject to competition are not competitive. As a result, regulated backhaul services will be available on those routes from 15 May 2009. However, the Commission also concludes that three routes that the Commission had not previously expected to be subject to competition are in fact competitive.

The review looked at a number of backhaul routes and examined whether there was actual or potential competition to Telecom on those routes. Where the Commission finds that there is actual or potential competition on a backhaul route, it is not subject to regulation. By contrast, routes that the Commission finds not to be competitive are regulated.

The review's conclusions reflect changes in the competitive backhaul market and take into account the unbundling of additional local exchanges by Telecom's competitors.

The Commission's 2008 decision on backhaul set out which backhaul routes were subject to regulation, as well as the terms and conditions governing the supply of the backhaul service on those routes. The 2008 decision indicated that the Commission intended to regularly review backhaul routes, acknowledging that there were likely to be rapid changes in the state of competition in backhaul markets.

Unbundling of additional local exchanges by Telecom's competitors meant that new backhaul routes, which were not considered as part of the Commission's June 2008 backhaul decision, have now been assessed. The Commission concludes that 13 of the 41 new routes are competitive.

More technical details, including which routes were looked at as part of the review, are available in the Commission's final report.

Future reviews of the backhaul decision are planned to be carried out on a three to six monthly basis, with the next review due to start in early July 2009.

The Commission's final review report can be accessed on the Commission's website under Regulated Industries/Telecommunication/Standard Term Determinations/Unbundled Local Loop Backhaul Service

Background

Local loop: the 'unbundled copper local loop network service' (local loop) refers to the service that enables access to, and interconnection with, Telecom's copper local loop network. It allows telecommunications companies to supply voice and broadband services to retail customers without the need to replicate the local loop.

Backhaul: the 'unbundled copper local loop network backhaul (telephone exchange to interconnect point) service' (backhaul) provides transmission capacity in Telecom's network between the handover point in Telecom's local telephone exchange and the access seeker's network, for the purpose of providing access to, and interconnection with, Telecom's local loop. This does not include Sub-loop Backhaul, which provides transmission capacity in Telecom's Network between the handover point in Telecom's street-side distribution cabinets and the handover point in Telecom's local telephone exchange for the purposes of providing access to, and interconnection with, Telecom's network between street-side distribution cabinets and retail customers. Sub-loop Backhaul is covered by a separate STD, which is due to be released shortly.

Backhaul routes: backhaul routes are classified under the backhaul decision as being Primary Links or Secondary Links. The figures in the above media release relate to Primary Links only.

Actual or potential competition: the Commission has considered the competitive nature of backhaul routes as outlined in paragraph (b) of the UCLL Backhaul Service, which provides:

(b) either

(i) Telecom faces limited, or is likely to face lessened, competition in a market for transmission capacity between Telecom's local telephone exchange (or equivalent facility) and the access seeker's nearest available point of interconnection; or

(ii) Telecom does not face limited, or is not likely to face lessened, competition in a market for transmission capacity between Telecom's local telephone exchange (or equivalent facility) and the access seeker's nearest available point of interconnection, and the Commission has decided to require Telecom's unbundled copper local loop network backhaul (telephone exchange to interconnect point) to be wholesaled in that market.

For the purposes of the review, the Commission considered whether Telecom faced competitive constraints, either from existing competitors, potential entrants or countervailing power held by customers.

The Commission's backhaul decision and related documents can be found on its web site www.comcom.govt.nz under Regulated Industries/Telecommunications/Standard Term Determinations/Unbundled Local Loop Backhaul Service.

The changes as a result of this review will replace Appendix B in Schedule 5 "UCLL Backhaul POI Site Related Information" of the Commission's Standard Terms Determination for the designated service Telecom's unbundled copper local loop network backhaul (telephone exchange to interconnection point) with the new Appendix B in Schedule 4 of the final review report.

Copies of the draft review report and public versions of submissions on it from Telecom (Chorus) and Telecom (Group) are also available on the Commission's website www.comcom.govt.nz under Regulated Industries/Telecommunications/Standard Term Determinations/Unbundled Local Loop Backhaul Service.