Kordia buys Orcon

New Zealand now has its first state owned ISP with Kordia (formerly BCL the transmission arm of TVNZ) buying Orcon.

Firstly congratulations to Seeby Woodhouse and Mark Mackay for the sale. Great to see their investments over the years pay off.

Also congratulations to new CEO Scott Bartlett. I’ve had the pleasure of working with Scott on some telco issues through his involvement as a Director of ISPANZ – the ISP Assn of NZ.

However (and this is very much a personal view) I am not convinced the public good is served by have the taxpayer become the owner of an ISP in what is a very competitive industry. Not that Kordia is to blame – Trevor Mallard has told SOEs to go out and pursue business opportunities, even if it crowds out the private sector.

Kordia claim Orcon will be run independently, but it does appear that they have the risk of becoming a vertically integrated player like Telecom running both an access division and a wholesale/retail division. And that is the problem so many have been trying to solve.

I thought Kordia was possibly uniquely placed to become a major provide of fibre access around NZ. That is an area where the market is not competitive, and never fully will be, and in my opinion a much more useful area for a state owned company to be investing in. But with Kordia entering the services market as well as the access market, it is less clear.

Rod Drury has similar concerns to me, by chance. He says:

I would have thought Kordia would be the natural manager of state managed infrastructure, so this move would disappoint me. Regardless, becoming a vertically integrated ISP and competing against private industry doesn’t seem quite right.

On the positive side, it may mean Orcon has deeper pockets when it comes to investing in DSlams under local loop unbundling. But it it really wants to expand big time, then it will be Cabinet having to decide whether to inject more capital into Kordia (as Cabinet decided for NZ Post and Kiwibank) and you know the Government as the regulator and as a market player is generally not a good thing.