Meanwhile, things still weren’t great on the home front, and they were about to get worse. On top of our other issues, John’s father was diagnosed with terminal cancer. Pat and Ralph Savage lived at Waihi Beach at the base of the Coromandel Peninsula, where John and I had bought a bach many years previously. John was deeply upset by news of his father’s illness and was still struggling to find a way to move forward in his chosen field, having completed his photography qualification through Massey a year earlier. He travelled up to Waihi Beach regularly during this time, never knowing when he might end up going to a funeral.

In August 2004 John had his first public exhibition at a dealer gallery in Sydney, which was a fantastic achievement given the short time that he’d been a photographer, and fortunately I was able to organise my schedule to be at the opening to support him. However, just a couple of months later, in late October 2004, Ralph died quietly at home, three months after his diagnosis. We were both there, along with the rest of John’s family, when he died. Pat was exhausted after the months looking after Ralph at home, although she had received wonderful support from a local hospice.

During my two decades with John, I’d spent a lot of time with his family. In fact, I’d been friends with John’s sister, Andrea, at university before he and I got together. John’s parents had always welcomed me into their family and we’d enjoyed many happy times together, especially at Waihi Beach, where we had spent many summer holidays, John surfing and me pottering about.

Obviously this was a very difficult time for John, but I probably didn’t read the signs as well as I should have about what was to come. At some level I must have known something was very wrong, however, because around the end of the year my skin problems got steadily worse and I had to wear heavier and heavier make-up to camouflage them.

In mid-March 2005 I flew straight back from a week in Australia to my friend Pip Greenwood’s wedding in Queenstown. It was a gorgeous Central Otago day and a lovely wedding. The speeches made by Pip, her husband David Gibson and her father were all wonderful and I was very happy for her, but I also felt sad inside because at the last minute John hadn’t been able to accompany me. Being at such a happy occasion, I couldn’t help but reflect on the fact that things were seriously flat between us. There just wasn’t the connection there used to be.

John and I went to our place at Waihi Beach for Easter but we were not as settled and content in each other’s company as we had always been previously. The following week, on the Tuesday evening, John came home and said he’d decided to leave, and was going to stay with his best friend. In the few days leading up to this we had done something we had never done before, which was to actively fight.

He told me he’d been having an affair. I was devastated. I knew the woman involved, and while she and John were equally culpable, I found myself blaming her. I have thought about my reaction often since. Given my strong feminist views, why was I able to forgive John, who apologised to me in great distress, and with whom I continue to have a strong friendship, while I have never spoken to her since and have no desire to do so? Why did I blame her? Is there some deep biological thing that means when another woman takes your man you forgive him but not her?

Their affair had in fact ended a few weeks prior to our break-up, but John saw it as a big wake-up call that he was not living the life that he wanted. I was deeply upset of course, but I was never angry with him because I’d seen how depressed and miserable he was, how much he was suffering, and what a difficult year he’d been through with the death of his father. I could see that he needed to be in his own space, away from the constant train station that was my life and in a more contemplative environment. While during my first anxious years as CEO John had been a great support for me, over time he became less emotionally present. He was dealing with his own struggle to find his way professionally, and as a very private person he had finally had enough of doing the corporate spouse bit.

The week of our break-up coincided with a two-day board meeting, a strategic retreat. I did my very best to hold it together, but both Roderick Deane and Mark Verbiest realised that something was wrong, although I didn’t explain anything to them at that point. I confided in only one or two of my closest women friends.

It only took John and me a couple of conversations to sort things out on a practical level. Fortunately he wanted to leave Wellington, so did not want to live in our apartment. There were no children, just our cat, Mickey, who we both loved. Mickey had never enjoyed being in the apartment and after John left, because I was out all the time, he became very sad. We made the decision to give him to John’s mum, and Mickey was great company for Pat for several years until he died. Animals can be the most wonderful companions, giving their owners so much joy. And they have so much to teach us about trust and forgiveness, and about giving people another chance even when they have been hurt! I knew it was the right decision, but from the day John came to take Mickey away it was very hard to be in the apartment by myself with no one else and no animals for the first time in my entire life.

It didn’t take us very long to agree what we considered a fair division of our assets. But our experience when we went to talk to lawyers to get a formal separation document drawn up was very revealing.

I went to see a top divorce lawyer in Auckland, who pretty quickly advised me that I was being too generous. After all, we weren’t married and didn’t have any kids. Meanwhile, John went to a local neighbourhood matrimonial property lawyer in one of the inner Auckland suburbs and got exactly the opposite advice — that he should go for more. We told both lawyers just to proceed on the basis we had already agreed. John’s lawyer asked him to sign a document saying that she’d given him advice to the contrary and he was ignoring it!

One or two of my closest friends also thought I was being quite generous, but I simply saw it as fair given the years that John had supported me. I think his support of me in the 22 years we’d been together was without precedent in terms of the support I’d ever seen any other woman receive. I knew John’s passion for photography meant that his income-earning potential in the future would be much lower than mine, and I wanted to feel good about how I’d handled matters.

Interestingly, our separation never really featured in the media. When it was commented on a little later, it seemed to be assumed that I had left him — an interesting commentary, perhaps, on the perspective that the person with the most economic power in a relationship is the one who calls the shots?

We remain friends to this day and I continue to value John’s insights and advice. Of course we changed our wills, but we’ve still left things to each other we accumulated during our time together.

 

After John left, the reality took a while to sink in. Because I had always been away a lot and we were still talking regularly on the phone, it just felt like it was one of those periods where we weren’t seeing that much of each other. But gradually it became all too real: me always being by myself in the apartment and waking up alone in what had been our queen-sized bed.

I did a lot of travel in 2005; to London, the United States (twice) and Hong Kong to meet investors, to Sydney and Melbourne to meet investors and customers and to talk to politicians. In particular I found Helen Coonan, who was then Australian Minister of Communications, a superb politician, able to see all sides of at times complex issues.

One of the reasons we needed to spend so much time overseas in 2005 talking to overseas investors was because the Australian government was preparing to sell a stake in Telstra, and we knew many fund managers would potentially sell Telecom New Zealand shares to buy Telstra. As about 75 per cent of Telecom was owned by overseas investors, this was potentially a real risk to us. On the other hand, some members of the financial community, when asked about whether they would switch out of Telecom into Telstra, made comments like, ‘Well, we prefer Telecom because it’s a better monopoly’!

And of course I continued to travel all around New Zealand — Auckland, Tauranga, Christchurch — meeting customers and talking to staff. I also accompanied the company’s top sales people on a trip to Mexico (the first time I’d gone on a reward-and-recognition trip in my time as CEO), travelled to Fiji where my youngest sister Marion was celebrating her fortieth birthday, and took myself off to a health spa in Australia for a few days during the winter. Good friends took me off to Queenstown for a couple of weekends over that winter too.

Although much of this travel was prescheduled, I also think it was the way I chose to deal with what had happened. Some people tend to go inwards and become reflective at times of personal challenge. Partly because I didn’t have the option of doing that and partly because of my personality, I chose to keep moving. Indeed, when I told Philip King the night before addressing our top 100 staff at a leadership day that John and I were separating, his advice to me was that whatever I did, I mustn’t let anyone say it was making any difference to my performance, on the grounds that it’s not a good thing for a CEO to appear in any way weak or vulnerable. He was right, of course. In fact, I felt that leadership day was one of my most powerful, perhaps because I felt more vulnerable than usual but was determined to hide it.

At a personal level, I had great support from my women friends during this time, in particular Chris Woodwiss, my assistant who had become a very close friend, and Margaret Doucas, a longstanding close friend, who cooked a lot of meals for me during that period. (John had been the cook in our household.) Nevertheless, whatever my outward appearance, I felt emotionally drained and mixed up that entire year and only started to feel like myself again about Christmastime.

 

In contrast, 2005 started very well workwise. We were all very upbeat at the February results presentation — ‘brimming with confidence’ was how one analyst described it. Sometimes it is indeed a blessing that you do not know what life has in store for you just around the corner! Debt was down, dividends were up, the threat of local loop unbundling was at bay, broadband connections were on a high growth curve and mobile was finally holding its own against global giant Vodafone.

Every quarter that year we outperformed Vodafone. Being the first to launch 3G and $10 texting were the two main catalysts, and by December we had rolled out our third-generation mobile broadband network, T3G, to every main town and city in New Zealand.

Our alliance with US telco giant Sprint had helped considerably by linking us into Sprint’s buying group for mobile handsets, an area where we had previously been less competitive than Vodafone. But by then Sol Trujillo had been appointed CEO of Telstra in Australia, and in November 2005 it was announced that Telstra would shut down its CDMA network. This was a huge blow for Telecom because Australia is the most popular roaming destination for New Zealanders. It meant we immediately had to consider a technology switch, even though CDMA was going very well.

Our biggest investment project in 2005 was the billion-dollar plan to replace the existing telephone network with a managed internet protocol (IP) network. The move to such a network would pave the way for Telecom to produce a raft of new, ‘intelligent’ phone services. Our vision was that the traditional fixed-line phone number, which is really a household phone number, would disappear. All customers would be given the option of having one or more contact numbers which they would be able to allocate to any phone at any time, and over which they would have individual control. Customers would truly be at the heart of the network. We envisaged reducing the number of telephone exchanges from about 600 throughout New Zealand to 20 to 30.

I freely admitted that we did not know how this would translate exactly into products, prices and ultimately profits, but I fervently believed that customers themselves would determine what the new services would look like. This was the same thing I had frequently said about mobile services: it wasn’t telco execs who saw how big texting would become, it was customers who seized upon it, first in the consumer market and then as a normal part of doing business.

At this time Telecom was seen as a very well-run company with a confident and highly competent management team. Analysts commented positively on the totally transparent nature of the financial community briefing days we held. While some companies chose to hide behind the complexity of their industries, we were very upfront and honest about the challenges we faced and what we were trying to do about them. I seldom prepared a formal presentation and usually spoke just from notes and from the heart.

In fact, heart was quite a key word for me. It had taken me a long time to get comfortable talking to the financial community, mainly because my style, whether in one-on-one sessions or talking with groups, is to integrate an intellectual, ‘head’ perspective and an emotional, ‘heart’ perspective. In the early days I found the financial community the hardest group to do that with because I believed it was only ever all about the numbers for them, but over time I’d come to realise that they were just a bunch of human beings like any other, with a range of talents, personalities and perspectives, and by early 2005 I was very comfortable dealing with them.

Being under a little less pressure results-wise we had the luxury of time to consider matters like staff development. My head of human resources, Trisha McEwan, was passionate about leadership development. Her assessments of the Telecom top 100 leadership team had shown very high performance in terms of IQ, but rather patchier results in terms of EQ or emotional intelligence, so each person in the top 100 was given the option to be part of a personalised leadership development programme. I had been part of many different leadership programmes during my career, but people told me this one added real value to how they saw themselves and helped them to become more well rounded. I think emotional intelligence is vital for leaders because it doesn’t matter how strong your ideas are, if you can’t interact well with others, your overall effectiveness will be weakened. Business is much more about people than it is about balance sheets. People follow people.

There are a lot of practitioners of dross in the consultancy game, but people who are good at what they do leave an imprint on all those they touch. For me in my time as CEO, the consultant who had the greatest effect was Elan (just the one name!) of Breakthrough International. He was already working in another part of Telecom when I became CEO and was highly regarded. I worked with him as a catalyst to accelerate the bonding process in my top team. We’d go off-site to places like the Martinborough Hotel for a day and a half and work through our belief set, our power to affect outcomes, what we were committed to, and our responsibilities as leaders. I found this to be very effective and long after Simon Moutter and I had left Telecom we concluded it was still the most powerful programme of its type that we’d been involved in or seen in action.

I went to Australia regularly during this period. By February of 2005 we were conducting our investor briefing days in Sydney because the next new investor was much more likely to be an Australian fund manager than a New Zealand one. And in April I went to the second Australia New Zealand Leadership Forum held in Melbourne.

In December 2004, I had had dinner at the Shangri-La Hotel in Sydney with the CEO of SingTel Optus, Paul O’Sullivan, and Trevor Rowe, chairman of investment bank Rothschild Australia. Paul suggested the meeting, to discuss SingTel Optus buying AAPT. He followed up in January with a letter proposing that we jointly explore options, including the creation of a joint venture between Telecom New Zealand’s businesses in Australia and SingTel Optus.

At that stage we were not considering selling AAPT, but it seemed worth exploring. We had succeeded in getting the Australian business into a stable position where it was no longer bleeding cash but it was very difficult to make much further headway. Although there was unbundling in Australia, wholesale was not regulated in the way that it was in New Zealand by then, so we were very open to SingTel Optus’s approach. It seemed a natural fit, among other reasons because they had no presence in the New Zealand market, so they weren’t competing with Telecom. After Paul’s overtures to us, we spent a considerable amount of time over the next 10 months looking at every possible permutation of a deal. Marko and I were both surprised when Paul rang Marko in October to say that they had decided not to put anything formal on the table in relation to Telecom’s Australian assets.

Had they been genuine, or was that a 10-month tyre-kicking exercise, making it very difficult for Telecom to plan for AAPT’s future? I think they were genuine, but then I generally do tend to believe the best of people.

There was certainly plenty on at work to keep me busy. During that year and in 2006, two of New Zealand’s largest corporate customers — Westpac and the Ministry of Justice — put their telecommunications up for tender and I was personally quite involved in both bids which, following rigorous processes, we went on to win. Somewhat unusually, in both situations, the key CEO decision-makers were women: Ann Sherry, CEO of Westpac, and Belinda Clark, Secretary of the Ministry of Justice.

Interestingly, as my personal life was going into meltdown, Telecom’s share price was riding high, hitting $6.50 in early April 2005. Little did I know that it would never — up till the time of writing— reach those heights again.

The year-end profit for the year to June 2005 was $916 million, including a one-off gain of $86 million from the sale of Telecom’s stake in INL. It seems unlikely that Telecom will ever make profits at this level or anything approaching it again.

From time to time I have wondered whether I was even more discombobulated than I realised, and whether I missed some signs in the eight months from April to the end of the year that at another time I might have heeded. Certainly the press about Telecom was all positive in the first quarter of 2005, but by the end of the year it was starting to be laced with a heavier degree of criticism.

In early May I had warned that Telecom’s future profits would be hit by our investment in new technologies, and the share price never really recovered from that. Herein lay the nub of the problem. Although we were spending more on capital expenditure every year, mainly to drive broadband growth, it was never enough for those who thought that we should simply be acting as a good corporate citizen and increasing that capital expenditure figure even further.

 

Our involvement with the New Zealand government continued. From the winter of 2004 I started meeting regularly with David Cunliffe, who had been the Associate Minister of Communications since May 2003 and became the Minister of Communications in December 2004. I had several meetings with him during May and June 2005. During this period, conversation was dominated not by broadband matters but by mobile termination.

The Telecommunications Commission had recommended that mobile termination be a regulated service for mobile calls on second-generation technology and mobile calls if they were on Telecom’s third-generation network but not on Vodafone’s third-generation network. This was seen as nonsensical by the wider industry (and probably the minister and officials) and we worked to make a commercial offer that included all 2G and 3G calls and put that in front of the minister. We then released this publicly as part of a process of it being returned to the Commission for reconsideration. (Vodafone objected to their offer being released.)

During this period I attended several social events with David Cunliffe and we had several telephone calls in addition to our face-to-face meetings. He was at pains to tell me that he felt Telecom was dealing with the government and regulatory matters in a highly professional way.

In terms of broadband, we had never heard back from the minister’s office (at that time Paul Swain) when we wrote setting out our commitment to a goal of 250,000 households with broadband by the end of 2005 and our expectation that a third of the growth in broadband would come from the wholesale market, i.e. that Telecom would be wholesaling broadband to other telcos such as TelstraClear, who would then retail it to customers. However, some months later Telecommunications Commissioner Douglas Webb wrote to us to say that he would be monitoring the targets of 250,000 households and a third of the total at wholesale, i.e. 83,000. We wrote back to him pointing out that this was not what we had said: we had said a third of the growth, not a third of the total. (This letter is in the public domain and what we said is a matter of public record.) He wrote back and said too bad, this is what the ministry has asked me to monitor.

By the winter of 2005 it was clear that we were going to make the target we had set for ourselves of 250,000 broadband customers with two batsmen to spare! But by this time key MPs were already in election mode and David Cunliffe’s rhetoric around telecommunications had started to harden. He started to emphasise the importance of the 83,000 wholesale number publicly, although privately he continued to say to me ‘a miss is not the same as a mile’. I sent him regular written updates of what we were doing to support our wholesale customers in driving broadband uptake, and to explain that 50 per cent of dial-up customers were our customers, 25 per cent were TelstraClear’s and 25 per cent were with other, smaller ISPs. Not only was TelstraClear not driving broadband, it also now had a perverse incentive not to do so, given they could expect a better regulatory outcome if they didn’t! In response to one of my updates David responded that the government would take action if Telecom didn’t meet the broadband and wholesale targets — which, based on what we had committed to, we did.

Clearly we had influence over the total number of broadband customers and continued to drive broadband growth through offers like free connection and installation and dropping the price of entry-level packages to encourage people to migrate from dial-up. We had a clear hierarchy of priorities: the first step was to get broadband reach out as far as we possibly could (that had been the focus in 2004), then to convert the still hundreds of thousands of dial-up customers onto broadband, which was our focus in 2005. The focus of 2006 was going to be on driving sales growth onto higher-speed packages.

In late June, Douglas Webb made a presentation which was critical of our approach to wholesale. He said he thought we were taking a too narrow, commercial approach. Following that we started working on a ‘wholesale charter’, focused on voluntarily offering service equivalence, i.e. a completely level playing field between Telecom Retail and Telecom’s wholesale customers, who were Telecom Retail’s competitors (the other telcos and internet service providers).

In early September I flew with the board to Europe to meet with Alcatel, our supplier partner in the fixed-line business in the transition to a managed IP network, France Telecom, 3 Italy and Telecom Italia.

On September 10, while I was waiting in transit at Frankfurt airport, David Cunliffe called me to run through Labour’s telecom­munications policy. This was the second of two conversations I had with him while I was in Europe. I took careful notes of that call and what David said would be the Labour Party’s approach to telecommunications, should they be returned to power. He covered the background, saying how ultra-light-handed legislation had stifled competition, recounting how in 2001 Labour had brought telecommunications policy into line internationally by setting up the Telecommunications Commissioner and sorting out interconnection and number portability issues.

In 2004 the government had accepted the recommendation of the Commerce Commission and gone for wholesaling rather than unbundling, and the challenge now was to build on that platform. He said the goal was to bring the benefits of internet and communications technology (ICT) to all and that Labour’s priorities were to:

  • implement the digital strategy, the components of which were to
  • unlock digital content
  • build capability in the sector
  • grow broadband, and
  • promote demand
  • complete an implementation review of the 2001 Telecommunications Act no later than the end of 2006
  • address any remaining issues around wholesale
  • consider broadband uptake targets
  • implement a Telecommunications Complaint Resolution Service
  • conduct municipal fibre pilots (i.e. local body fibre networks)
  • sort out some spectrum space for non-commercial usage
  • implement changes to ICT procurement and procedures in the government sector, and
  • work on the government shared network (GSN), linking various government agencies with a secure, high-speed IT & T network.

Did any of that sound like the then Minister of Communications spelling out to the CEO of Telecom in a transparent, straightforward way what Labour expected to see from Telecom should they regain the Treasury benches? Dear reader, I’ll leave you to make up your own mind.

 

Early one weekday morning, a couple of days after returning from that board trip to Europe, I was hit by a car on a pedestrian crossing outside the swimming pool on the way back to my apartment. It had stopped just short of the crossing, but was shunted into me by a van behind it travelling at high speed. The point of impact was my right hip. I went up over the car’s bonnet and landed in the middle of a wet, cold road, on my right side. It all happened so fast, in just a split second.

I knew as soon as I landed on the road, winded and severely shaken, that I hadn’t broken anything, just as I had known a few years earlier when I’d been thrown from my horse that I had badly broken my right wrist. Staff from the pool immediately rushed out with oxygen, which they administered to me until an ambulance arrived.

I’d only been in hospital for a few minutes when Mark Verbiest walked in. I thought he’d come to visit me and couldn’t understand how he’d heard about the accident so quickly — only to find out that his wife had driven him there as he had been suffering all night with a painful kidney stone. We had a good giggle about that much later.

However, I was almost immediately visited by my wonderful assistant Chris Woodwiss, who asked what underwear I was wearing. I said none: I had just taken off my wet togs, put on my tracksuit and was going back home to get changed to go to work. So it’s true, it is those times when you’re wearing daggy clothes and no underwear that you have an accident!

Even though it was just two days before the election, Helen Clark called that day to express her concern about the accident. David Cunliffe also called me. I took the day off work, feeling very shaky, but was back at work the next day and made it to my father’s seventieth birthday celebrations in Ohope on the Saturday.

I was very bruised all down my right arm and right leg and needed several sessions with my osteopath to sort my body out, but I felt very fortunate that the consequences hadn’t been more severe. Nevertheless, a few years on I do notice now that I am a lot stiffer on my right side than my left, and on top of my daily swimming I need a combination of massage, yoga and other body work to avoid pain in my right hip, which I attribute to a combination of being hit by the car and a couple of earlier falls from my horse, every time onto my right side.

 

Following Labour’s re-election in September we had update meetings with Michael Cullen, Trevor Mallard, Steve Maharey and Jim Anderton, some of the other ministers whose portfolios were impacted by broadband. I had a good relationship with these ministers: I found Jim Anderton practical and action-oriented, I enjoyed Michael Cullen’s wit and intelligence, and I got on well with Trevor Mallard. I found him upfront and straight-talking and while I might not always have agreed with him, I always knew where I stood.

At none of these meetings did any of these ministers indicate that anything had fundamentally shifted in their perspective of us or in the telecommunications policy area. We understood that we would need to have a more proactive approach to wholesale, which stemmed from Douglas Webb’s prior challenge, and we’d been working for some time on developing the wholesale charter embracing the principles of service equivalence and levelling the playing field between us and our competitors.

Of course, it is entirely possible that in September 2005 the government hadn’t yet decided to introduce much heavier-handed telco regulation, which had an immediate and dramatic effect on reducing Telecom’s market value. As was revealed later on, this move was intended to be a centrepiece of the May 2006 budget, so at the latest it must have been decided on by early 2006.

In any event, the popular characterisation of events — that Telecom had repeatedly been warned by the government that it must do more to promote broadband and open up its network to competition but had ignored it, thus forcing the government to take action — is not how it was. Either the minister in particular and perhaps others in the Cabinet had decided on a certain course of action between September and December 2005 and chose not to reveal it until later, or they had not decided by then and the policy came together quickly in early 2006 — either way, there was no long, drawn-out period of the government, through either ministers or officials, communicating an expectation of the company that was not taken on board.

Interestingly, between September and December 2005 I had more than my usual number of conversations with Helen Clark. As well as calling me the day of my accident, she called me to discuss who would be the right person to chair the trans-Tasman Leadership Forum from New Zealand’s side. She called me to discuss the successful World Cup bid, and we had a Christmas lunch together, with Ann Sherry and a few other CEOs, at Ann’s house in December. At no stage in any of these conversations did Helen directly or indirectly touch on telecommunications policy.

In November we presented the wholesale charter to Douglas Webb, then Bruce Parkes, my head of regulatory affairs, and I presented this personally to David Cunliffe and his key officials. I sent David a letter, shared with the board, which addressed discrepancies between what he had said privately to me and what he had said publicly regarding the government’s intention to intervene further in telecommunications’ policy settings, and suggested we have dinner to discuss how Telecom could work with the government. This we did on November 9, together with Bruce and David’s political advisor from his office. It was a perfectly pleasant dinner at which David told me that of course he’d made certain public statements as Labour spokesperson on telecommunications, but now that he was minister it was an entirely different situation! Following the dinner he sent me a card saying that he looked forward to working constructively with Telecom.

Throughout this whole period in late 2005, my conversations with David Cunliffe were dominated by the way Telecom and the government could work together, with me encouraging him to set a new, high, overall broadband target, of which we would sign up for a significant proportion.

During late 2005 the whole environment was clearly worsening from our perspective, with more and more regulation on the cards and increasingly negative media. We discussed this at every board meeting. At no stage was an alternative way of managing the challenges proposed (except occasionally Roderick would push for a more ‘hard-nosed’ approach). This was not surprising. Our approach had worked extremely well for six years, since the Fletcher Inquiry had first called for a much tougher regulatory regime (including unbundling and cost-based wholesale).

By November the media was basically running the line that we would be dealt to severely by the government should we miss our wholesale broadband target. We decided to point out that our letter to the minister had talked about a third of the growth, not a third of the total. This was met with hostility in some quarters of the media, and I noticed the negativity level towards Telecom seemed to have shifted up a gear. The media tended to omit mentioning that we were well ahead of the 250,000 household target, which we actually achieved in October 2005, and focused instead on the wholesale number, or simply ignored both and focused on New Zealand’s ranking of 22nd out of 30 OECD countries for broadband performance. We tried to point out that this was a similar ranking to New Zealand’s GDP per capita performance and that there was probably a relationship between the two figures, but that didn’t fit the narrative of the day so it was ignored.

Every month I pored over customer research, and in this period I commissioned research on how customers felt about broadband — not the normal product research about features and packages and prices, which we regularly did, but more how people felt about it as an issue. Insight Research told us that of all the issues they had ever polled, broadband was among the least significant. In other words, it just didn’t rate highly as a public concern, although it was clear most people did support unbundling. And indeed we were still winning customer awards. In 2005 Xtra won multiple PC World Readers’ Choice Awards — for best ISP, best broadband internet service, and best service and support for an ISP (for the fifth year running).

From a customer perspective, most importantly, we knew that business broadband prices needed to come down, but for months the Telecommunications Commissioner had been deliberating on the TelstraClear application for UBS (Bitstream wholesale service) which set the wholesale rate. Many of our marketing initiatives had already been investigated by the Commerce Commission and we thought there was a very high risk, that if we dropped retail prices without having the appropriate wholesale price in place, we would open ourselves up to an investigation around having acted anti-competitively (i.e that we had reduced the retail price to customers but were not fairly allowing our competitors to compete with us because we had not dropped the wholesale price to them). The commissioner’s determination came out late December, just before Christmas, which freed us up to move on lowering the retail prices.

But before this happened, in November David Cunliffe announced he would be doing a telecommunications ‘stocktake’, with an unspecified process and a mid-2006 timeframe. It seems almost unbelievable that the country’s biggest publicly listed company and one of its most important industries should be subject to an unspecified review process that had no stated goals, no set of parameters and no draft determination that participants in the industry could comment on, and that something with such huge ramifications for the capital markets should have been treated in such a cavalier fashion, but that is exactly what happened. No regulatory body like the Commerce Commission or Securities Commission would ever be permitted to act in this way. We made it clear we were very concerned about the lack of due process, but no one was interested.

Prior to Christmas we had lunches with Geoff Dangerfield, head of the Ministry of Economic Development, and his senior official David Smol; Maarten Wevers, head of the Prime Minister’s department, and other officials from the PM’s department. At no stage did we get any indication that sentiment towards Telecom had shifted.

The most damaging thing that happened in this period was a major newspaper playing up my letter to Paul Swain from the previous year, citing it as an example of big business having undue influence over the government and conveniently omitting the fact that we were writing in support of the Commerce Commission’s determination. I believe the publication of that letter caused the government to perceive being seen to be too close to Telecom as a political vulnerability.

In November, Helen Clark returned from a visit to Korea and was reported to have said that she felt like a country cousin in relation to the broadband presentations she saw there.22 In comparison to New Zealand, Korea has 60 million people, with about half living in high-density apartments, and the Korean government had at that point already spent around US$600 million on driving broadband.

I felt that there was no preparedness — by the government, by commentators, by the general public — to face the reality of the poor economics of broadband in a low-population-density country like New Zealand. Suddenly it had become like water — everyone’s birthright to have as much as they wanted when they wanted, preferably with someone else paying.