In 1987 the New Zealand Post Office divested itself of the newly created Telecom, which was created as a state-owned enterprise (SOE) on March 31. The Government-owned Telecom Corporation was to have a commercial focus. It purchased telecommunications assets from the Post Office for NZ$3.2 billion and work began on improving the services and network. Telecom launched its 025 mobile network and TDMA mobile data network. Beginning in 1987, the New Zealand telecommunications market was progressively deregulated.
1990s
In 1990 Telecom was sold to two United States-based telecommunications companies, Bell Atlantic and Ameritech, for NZ$4.25 billion. Around the same time, the "Kiwi Share". MED. http://www.med.govt.nz/templates/MultipageDocumentTOC____4213.aspx. agreement was drawn up, which included a provision that the company retained free local calling for residential customers. Also in 1990, Clear Communications (now TelstraClear) entered the New Zealand telecommunications market and so was the first network to compete with Telecom.
In 1991 Telecom listed on the New Zealand, Australian and New York stock exchanges. The following year Telecom implemented a NZ$200 million dollar fibre-optic cable connection between Australia and New Zealand. Also in this year, Roderick Deane was appointed CEO of the company. Then in 1993 Ameritech and Bell Atlantic reduced their share in Telecom to a combined 49.6%, and BellSouth (now Vodafone) set up the first mobile network to compete with Telecom.
Clear Communications reached an agreement with Telecom in 1995 on local service interconnection. Also in 1995 Telecom created First Media Ltd to develop a cable television network across Auckland and Wellington, called First TV.
1996
Telecom establishes a telephone exchange in the United States for international traffic.
Telstra New Zealand Limited (now TelstraClear) sets up operations in the New Zealand business market.
Telecom launches Xtra, which is New Zealand's largest internet service provider today.
1997
Saturn Communications Limited (now TelstraClear) enters the residential phone market in Wellington.
Telecom buys back NZ$1 million of its shares.
1998
Ameritech sells down its 24.8% shareholding in an international public offering.
Bell Atlantic issues exchangeable notes that are convertible into the Telecom shares that it owns.
Telecom celebrates 500,000 mobile customers connected to its mobile network.
Southern Cross Cables Limited, half owned by Telecom, announces plans to build a fibre-optic cable linking New Zealand with Australia and North America.
Vodafone New Zealand buys BellSouth and starts a campaign to attract Telecom customers to its network.
1999
Telecom establishes a presence in Australia, buying 78% of AAPT, Australia's third-largest telecommunication company.
Telecom upgrades its nationwide payphone network to smart card technology.
Telecom's broadband Internet service based on ADSL technology, called JetStream, is launched and rolled-out progressively in local exchanges.
Telecom begins charging customers who connect to the Internet using a local dial up number forcing all ISPs in New Zealand to change to an 0867 dial up number. Many consumers complain that this is in breach of Telecom's Kiwishare Agreement where residential customers are allowed free local calling.
Theresa Gattung is appointed CEO of Telecom, with Rod Deane moving to the position of chairman.
2000s
Telecom logo used from 2003 to 2009
2000
Xtra signs up its 300,000th customer.
Telecom Mobile, the mobile division of Telecom, celebrates 1,000,000 customers connected to its mobile network.
The New Zealand Government conducts a comprehensive review of the regulatory regime.
Telecom raises its AAPT shareholding to 100%.
Telstra merges New Zealand operations with Saturn to form TelstraSaturn Limited.
2001
The Government passes the Telecommunications Act, setting up a Telecommunications Commissioner.
Telstra buys Clear Communications to form TelstraClear.
2004
Telecom purchases Gen-i Ltd (May).
Telecom purchases Computerland Ltd (September).
Telecom won the Roger Award for The Worst Transnational Corporation operating in New Zealand.
2005
Telecom releases Bitstream, a 256 kbit ADSL service sold at wholesale prices (at approximately 10% below the retail price) to other ISPs.
Telecom's mobile customers find out that their privacy and security is not safe on the Telecom network, when a phreaker named ^god releases an exploit to the media allowing access to almost anyone's voicemail.
Telecom posts a profit of NZ$916 million.
Telecom's online retail store Ferrit launches with about 150 retailers.
2006
May 3: The New Zealand Government announces that it will require Telecom to unbundle the local loop to provide "access to fast, competitively priced broadband internet".
May 4: NZ$1.1 billion of its market capitalisation was wiped off following the announcement.
May 9: An audio clip recorded on March 2 was released involving Telecom CEO Theresa Gattung admitting the use of confusion as a chief marketing tool in the industry. The March recording also dismissed the New Zealand Government as "too smart to do anything dumb" with regards to regulation.
May 19: A video titled "Telecon" incorporating the May 9 audio clip and a dubbed Telecom ad was released. Telecom got it removed from YouTube but it is still available at other locations.
Late May: Roderick Deane resigns as chairman, and is replaced by Wayne Boyd the following month.
June 27: Telecom announces it will voluntarily separate its business into two operating entities - Wholesale and Retail.
July: Matt Crockett is appointed CEO of Telecom's Wholesale division.
November 28: The Telecommunications Amendment Bill is introduced to split Telecom into three business units, with network access separated from the wholesale and retail units.
2007
January 16: The Librarians Association of New Zealand put in a complaint about a Telecom advertisement where 3 young school children state that, "Only dumb kids read books, brainy kids have broadband." Originally Telecom stated that is the views of the young children and not Telecom and the advertisement was unscripted, later that week Telecom choose to edit the advertisement to remove the comments made by the children.[citation needed]
January 19: It is reported that Paritai Drive, Orakei, one of the richest streets in Auckland, is still not capable of receiving a broadband DSL service and there are many other well populated areas around New Zealand still not capable of receiving broadband. Opposition Woosh Wireless immediately tested their service in the area and gave residents the opportunity to join their wireless broadband service.
February 2: Telecom announces Director and CEO Theresa Gattung will be stepping down effective 30 June 2007 and a search for a new CEO will begin immediately.
February 5: Telecom announces that from March 2007 they will begin rolling out ADSL2+, more than a year after originally stated for roll out.
March 31: The 025 D-AMPS cellular network is closed down.
April 1: All New Zealand telecommunications providers including Telecom introduce number portability.
May 2007: British Telecom have been in discussion with the New Zealand government regarding Telecom's monopoly control of the NZ broadband network. Three to four years previously, British Telecom were in a similar position to that which NZ Telecom are now in; the British broadband network has since been broken up and the NZ government are keen to learn and possibly copy the development/regulatory/investment model used by the British firm.
The Auckland Chamber of Commerce has publicly stated that if Telecom do not invest in a next-generation high-speed network, comparable with that of other Western nations, they will fund a private fibre-optic based service in the 100 megabit speed range. The proposed coverage of this would be within 200m of a path running south from Auckland CBD (situated to allow as many businesses as possible to connect). Any company or private individual within this range would be offered a connection.
June 8: Telecom Mobile announces a plan to build a hybrid W-CDMA/UMTS-CDMA network , based on the WCDMA HSPA technology, to eventually replace its current CDMA EV-DO network. This network will go online by the end of 2008.
June 28: Telecom announces that Dr Paul Reynolds, CEO of BT Wholesale, has been selected as the new CEO, to commence on 27 September. Simon Moutter was appointed as acting CEO in the interim.
June 30: Theresa Gattung steps down with a reported leaving payment of $5.125 million in cash and 12 weeks annual leave owing.
September 27: Dr Paul Reynolds commences as CEO of Telecom.
November 21: Mark Ratcliffe, Chief Operating Officer for Technology, is appointed CEO of Telecom's soon-to-be spun-off network division.
2008
A van with the Chorus livery.
January 16: Telecom announces the formation of Chorus, its new network infrastructure division.
March 31: Telecom officially separates into three divisions (Chorus, Telecom Wholesale, Telecom Retail)
April 1: Russ Houlden, a colleague of Reynolds at BT, is appointed Chief Financial Officer. He replaces Marko Bogoievski, who joined Infratil.
2009
January 12: Telecom announces the closure of its online retail store Ferrit.
May 29: Telecom launches its UMTS 850MHz network, XT Mobile Network, to the public.
August: An industrial dispute emerges between Chorus and the Engineering, Printing and Manufacturing Union after servicing contracts in the Auckland & Northland regions are awarded to Australian company Visionstream, which has planned to change technicians' employment contracts to a dependent contractor model.
October 16: New logo announced
Xtra
Main article: Xtra (ISP)
Telecom Mobile
Telecom Mobile is New Zealand's second-largest mobile operator, with less than 50% of market-share, slightly behind Vodafone. Telecom used to operate AMPS, Digital D-AMPS/TDMA and currently operates CDMA2000. AMPS and D-AMPS service was sold under the 025 brand and CDMA services are sold under the 027 brand. Telecom turned off the 025 network on 31 March 2007. Most of its customers had migrated to the 027 network. The 027 CDMA EV-DO network is marketed as T3G, a 2 MB third-generation mobile system.
Telecom announced a plan on 8 June 2007 to build a W-CDMA/UMTS network, to be called XT Mobile Network, based on the WCDMA HSPA technology, to replace its current CDMA EV-DO network. The network was launched on 30 May 2009. All their cell sites provide service at 850MHz with some 3G 2100MHz overlay in urban areas to serve inbound roaming customers with 2100 MHz only phones. Telstra's Next G (in Australia) and AT&T Wireless also have networks running on 850MHz. 850 MHz services can cover greater geographic distances and penetrate buildings more effectively than higher frequencies. The Telecom UMTS network is planned to have no GSM coverage, which means there will be no coverage for 2G phones.
Current CDMA phones are guaranteed by Telecom to work until at least June 2012.
Customer numbers and market share
The following shows customer numbers and market share information for Telecom Mobile, including both the now-shut-down 025 network and current 027 network customers (these refer to Telecom Mobile's numbers starting with 025 and 027). Since Vodafone New Zealand took over BellSouth in the late 1990s Telecom's market share has dropped every year.
In 2005 Telecom launched New Zealand's first 3G network, using the brand name T3G. Being first into the 3G market, along with aggressive marketing and a $10 a month text message package, has allowed Telecom to claw back some market share from Vodafone. In November 2005 Telecom reported 72,000 new mobile phone customers, compared to 27,000 for Vodafone.
Quarter
No of customers
Market share%
December 1999
858,000
68.37%
December 2000
1,150,000
60.43%
December 2001
1,379,000
56.94%
December 2002
1,229,000
50.18%
December 2003
1,298,000
49.95%
March 2005
1,520,000 (approx)
44.6%
November 2005
1,600,000
46%
March 2007
1,900,000
49%
Criticism
While there are now many competitors in the cellular, toll-call and internet markets, Telecom continues to be criticised for using its status as a former general monopoly to charge high prices whilst providing, in some people's opinion, poor service; On XTRA Broadband it used to cost over $1200 to download 100GB of data in a month, plus monthly access fees (at residential rates, business was more expensive). Prices have since dropped as competition in the broadband market becomes stronger. The unlimited plans have since been removed as Telecom found it was unable to deliver the speeds promised. Traffic management was meant to be applied over Peer-to-Peer and related traffic, but was instead implemented over all traffic. It has proved difficult for other companies to establish residential services due to Telecom former control of local loop services. Telecom has also leveraged its control of residential services to establish the country largest ISP, Xtra.
Competitors have alleged that Telecom engages in unfair practices to prevent them from gaining ground, for example by reselling broadband capacity to Xtra at lower prices than to other ISPs.
In July 2005, two dozen Internet service providers formally complained to New Zealand's Commerce Commission via a letter. Notably absent from the list of signatories were Telecom's ISP, Xtra, and several ISPs owned by its main competitor, TelstraClear.
On February 1, 2007 the Consumers' Institute gave its "supreme ass award" for bad products to Telecom for its Xtra broadband service, Consumers Institute executive director David Russell claimed that since Telecom "unleashed" its broadband speeds, the institute had been "inundated with complaints of slower speeds and frustrating cutouts".
Telecom has been given the Roger Award more than once, in 2004 and 2007 - and only the second company awarded as such, with the defunct TranzRail being the first.
Effects of monopoly
The New Zealand Treasury once estimated the economic loss from Telecom's (now former) monopoly to be in the region of $50$250 million a year. Another study commissioned in 1998 by competitor Clear (now TelstraClear) estimated that the loss was $400 million a year. At a retail level Telecom now faces competition in all areas - cellular, internet, toll-calls and, subject to ongoing developments, in local calling. At a network level these retail services often resell Telecom wholesale products.
Telecom response
Telecom claimed one reason for poor broadband uptake in New Zealand was because of the fact New Zealand residential subscribers enjoy free local calling. Telecom stated ustomers have the option of moving to faster broadband services, but free local calling creates a disincentive by allowing them to use dial-up for as long they want (i.e. they do not have to pay a per-minute call charge while using dial-up, unlike many other countries where local calls are charged for). However, some internet experts and competitors disagreed and even the secretary of the OECD took a shot at Telecom.
Calls for change
Telecom failed to reach their self imposed goal of around 83,333 wholesale broadband customers by the end of 2005. During her opening address to parliament, Prime Minister Helen Clark criticised the state of the internet in New Zealand . This was followed by extensive criticism in the media such as in two high profile television programmes, in two episodes of Campbell Live (whose past major sponsors include Telecom), during which CEO Theresa Gattung was challenged by host John Campbell, and an episode of the New Zealand edition of Sunday. Critical articles had been published by various magazines and newspapers, including the largest newspaper, the New Zealand Herald. Of significance, many of these were lengthy and high profile articles compared to many previous articles critical of Telecom among the most noticeable of these was published by the National Business Review, in which it was stated that "Far from being 'Xtraordinary', as its multimillion dollar advertising would have you believe, Telecom is strangling the nation advancement." While in Wellington for an ICANN meeting, Vint Cerf was reported to have made a personal visit to David Cunliffe, the telecommunications minister where it is believed he recommended that Telecom be unbundled . The New Zealand Government investigated whether it needed to force Telecom to unbundle the network, thereby allowing other companies access and improving broadband service for consumers.
XT Network Outage
Telecom's new XT network has faced a series of frequent and high profile outages since its launch in the consecutive months of December 2009 to February 2010 . As a result of the loss of service Telecom has offered a five million dollar compensation package for its customers.
Local loop unbundling
In a decision by the New Zealand Government on May 3, 2006, Telecom was forced to unbundle the local loop. This allowed competitors (such as TelstraClear, Orcon and Ihug) to offer broadband and other communications services throughout New Zealand by installing their own equipment in exchanges. The announcement of this decision was rushed ahead of schedule, as the documents were leaked to Telecom who advised the government of the leak. It was widely reported that the government had intended to make the announcement during the 2006 Budget. Most of Telecom's competitors and many independent commentators such as InternetNZ and Paul Budde applauded the decision, with opposition to unbundling coming from the Business Roundtable, Federated Farmers, and Bruce Sheppard (representing Telecom shareholders). Legislation was introduced to enable the regulatory changes. Three other politic
