10. Implementation
242. For operational separation to deliver transparency and non-discrimination, a clear timetable for the implementation of the Undertakings will be required. Setting a specific and enforceable implementation timetable through binding undertakings will have regard to cost and implementation issues. It will also consider active incentives for Telecom to migrate customers and services to Next Generation Networks (NGNs), in particular, by setting an appropriate timeframe for EOI legacy services.
243. It will be important for Telecom NZ to display strong leadership to achieve the Undertakings and the Undertakings will need to recognise the importance of both incentives and counterfactuals to underpin the change process.
244. Some of the organisational elements such as the timetable for the establishment of the Access Network Services unit and IOG will be able to be implemented quickly (indicatively 2-6 months after the Minister approves Telecom's separation plan). Other areas such as delivery and migration of all customers to full EOI products for existing services will take longer as they require the realignment or redevelopment of systems and processes. It is initially considered that full Equivalence of Inputs (EOI) on the provisioning and delivery of all EOI services can be achieved within approximately 2-5 years of the date on which the Minister approves Telecom's separation plan. Partial implementation of EOI (i.e. the "Ready for Equivalence" date discussed below) can be achieved more quickly.
245. Setting the final implementation timeframes will be guided by the importance of each outcome as well as cost-benefit trade-offs. It will be important to balance implementation speed against minimising the risk of disruption to wholesale customers and end-users of telecommunications services. Technical resources may become an implementation constraint but implementation planning and prioritisation can help to ameliorate potential issues.
246. The Act requires the separation plan to include a "separation day" on which the undertakings come into effect. It is proposed that the organisational elements of the undertakings, such as the establishment of the ANS and Wholesale Units would be completed by Separation Day.
10.1 EOI Implementation
247. Providing EOI to the standards and timetables required in the BT undertakings has involved creation of new service ordering and management gateways to be used by customers (including BT) and separating out the operations and information systems which previously held data and functionality of many unrelated services.
248. In practice, Telecom will face a number of choices regarding how to implement EOI on key services, including:
- Re-engineering of legacy Operational Support Systems (OSS)/Business Support Systems (BSS); or
- Implementing support for legacy services as a part of OSS/BSS upgrades or replacements; or
- Transition to replacement NGN services with EOI built in to the OSS/BSS.
249. It is considered that Telecom should be free to determine the strategy and approach to the provision of EOI as long as the requirements and timeframes in the undertakings are met. LLU, supporting co-location and backhaul services, and bitstream services are considered critical to the promotion of competition. Whilst there are various issues with implementing EOI on these services, these are currently considered to be surmountable issues that are a matter of time and cost. It is intended that the final implementation timeline for Telecom's operational separation plan should reflect their relative priority.
250. Section 7 proposed that the following regulated services should be EOI: LLU services (including co-location and backhaul), all variants of UBS, and UBS backhaul.
251. Substantive implementation timeframes were allowed for achieving full "Equivalence of Inputs" on key wholesale services in the BT Undertakings. These include ready for service dates and installed base migration dates. A similar phased approach is proposed for implementation of EOI services by Telecom.
252. In New Zealand, the LLU service, supporting backhaul and co-location services and the new unbundled bitstream access services were only introduced with commencement of the amended Act in December 2006. The terms and conditions for the supply of these services are currently being developed through the Commerce Commission's Standard Terms Determination process.
253. Through that process, industry has expressed a desire to have some products for these regulated services on the market as soon as possible. There may be a trade-off for access-seekers between getting new regulated services such as LLU and unbundled bitstream access services quickly and getting these services provided on an EOI basis. The preferred approach is to ensure that the new regulated LLU and unbundled bitstream services are able to be launched as soon as possible, even if they are not initially delivered on an EOI basis. In particular, delivery of EOI should not be used to delay the launch of the new LLU and unbundled bitstream access services.
254. The Commerce Commission's Standard Terms Determination processes will set the timeframes for the newly regulated services to be available by Telecom to access seekers (termed the "service availability" date for the purposes of this paper). EOI implementation phasing will need to take adequate account of this service availability date that will arise out of the Commission's Standard Terms Determination process as EOI cannot be required in advance of that date. Nothing in the separation requirements would prevent Telecom from introducing a commercial service into the market ahead of that service availability date.
255. The following summarises key EOI implementation milestones (and an important pre-requisite) that should form the basis of EOI implementation :
- Prerequisite for EOI implementation – The service is made available by Telecom to access seekers on the terms set out in the Commission's Standard Terms Determination - the "Service Availability" date. This is applicable to the following EOI services: LLU, co-location, LLU backhaul, UBA, and UBA Backhaul which are not yet provisioned by Telecom on a wholesale basis.
- EOI Milestone 1 - The "Ready for Equivalence (RFE)" date which means the date from which an EOI product or service is available for use by other Service Providers for their new end-users, and is also available for use by Telecom (and is in use by Telecom) to handle all product or service events for New End-Users (being new after the RFE date). The RFE date is also the date of the start of the migration of the relevant installed base of End-Users (this is called the "Ready for Service" date in the BT Undertakings)
- EOI Milestone 2 - The "Installed Base Migration Complete" date, which means the date by which the migration of all of the relevant Telecom installed End-User base to the EOI product is completed
256. The timetable for implementation of EOI services will be a critical implementation issue. Lessons from the UK suggest that a focus on equivalence can potentially result in a lowering of service standards to all parties, rather than increasing the service received by entrants to the same standard the incumbent previously enjoyed. It will be important to mitigate against this risk during the implementation phases.
257. Where relevant, the "Service Availability" date and the "Ready for Equivalence" date would not necessarily need to be different. As discussed earlier, where there is a significant trade-off, it is expected that the "Service Availability" date should take priority.
258. The full list of equivalence timeframes from the BT Undertakings is provided in Appendix 2 below.
10.2 Ensuring the Undertakings are Relevant Over Time
259. The Act provides a process for the separation undertakings to be varied. This will generally be used for substantive matters when changes to key provisions of the signed undertakings are required. Some of these changes will come to light as part of the Commerce Commission's monitoring of compliance. Others may result from changes in the market or the nature of competition.
260. In addition to the statutory variation mechanism, a number of mechanisms will need to be specifically provided for in the undertakings themselves in order that they are adequately "future-proofed" to deal with change. The model outlined in this document already includes the following "future-proofing" features:
- Defining "relevant services" that are covered by the undertakings to address the potential for new services to be regulated in future and become subject to an equivalence requirement. For example, if services that use the Access Network assets, such as fibre-based services, become listed in Schedule 1 of the Act or become subject to a registered undertaking under Schedule 3A of the Act, then the default position would be that the ANS Unit would be required to provide those services on an EOI basis.
- Taking a forward-looking view of the access network, and placing regional backhaul assets under the control of the ANS Unit.
- Emphasising a technology neutral and future-proofed approach to the assets under the control of the ANS Unit such that it includes fibre assets, wireless local loops, future access assets, and is not just limited to the existing copper network.
- Considering whether the Commission should have some flexibility and discretion to deal with unforeseen minor implementation issues which are not of sufficient scale and proportionality to necessitate a formal variation, potentially by including an exemption or exceptions process in the undertakings.
10.3 Discussion Questions: Implementation
Key Questions
17. Given the wider regulatory context and potential trade-offs from EOI implementation as described in section 10.1, which EOI services do you consider should be implementation priorities?
18. Do you have any comments on mechanisms for ensuring the undertakings remain relevant over time as discussed in section 10.2?
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