Clear Communications Limited was a telecommunications company based in New Zealand. Until merging into Telstra's operations in 2001, it was the biggest rival to Telecom New Zealand.
Background
Prior to 1987, New Zealand's telecommunications sector was dominated by the New Zealand Post Office, who also provided telephony and telegraph services. In 1987 the Post Office was split into three new businesses - Telecom Corporation of New Zealand, New Zealand Post and PostBank. When Telecom was created in 1987 the firm of Touche Ross was briefed to examine the feasibility of competition in New Zealand's telecommunications industry. Intensive research showed New Zealanders were unimpressed by the prices they were being charged and were not happy with a generally unresponsive service.
By June 1988 Richard Prebble, then Minister of State Owned Enterprises, announced to the country the intention to deregulate the telecommunications industry and open it to competition. The mandate to the new state-owned enterprise, Telecom, was to operate in a profitable manner in a fair and competitive environment. The free and open competition became law with the Telecommunications Amendment Act in December 1988. Full deregulation for the telecommunications industry came into effect on 1 April 1989.
"Consumers will benefit substantially from opening up the telecommunications market to competition", Prebble told New Zealanders in June 1988. He noted that Telecom's competitors would be heavily dependent on it for facilities and services, giving Telecom scope to act anti-competitively if so wished. He added, however, that he had received an assurance in writing from the head of Telecom, Dr Peter Troughton, that Telecom would facilitate the emergence of a competitive market in telecommunications, and that it would provide interconnection to its facilities on fair terms and conditions.
Telecom's activities and the interconnection agreements, fundamental to the successful entry of competitors, were to be subject to the scrutiny of the Commerce Act 1986. The Department of Trade and Industry was also to act as a watchdog to keep telecommunications on a competitive track.
Establishment In 1990, Clear Communications made New Zealand history by establishing itself as the country's first telecommunications competitor.
Initial interest: 1988 There was a keen interest among state-owned enterprises (SOEs) such as New Zealand Railways Corporation, Electricorp (later ECNZ) and the Broadcast Communications (a subsidiary of Television New Zealand) who saw strong investment opportunities for their microwave, satellite or fibre optic cable capacity. The missing link was the telecommunications switching expertise.
Bell Canada International (BCI), MCI Communications (MCI), Cable & Wireless, British Telecom, Telecom Australia and several other prominent overseas telecommunications suppliers with the technological digital switching expertise the New Zealand-based parties were looking for.
Bell Canada undertook thorough market research and business plan studies in 1988. BCI was moving back into the corporate business of telecommunications and the newly liberalised environment in New Zealand provided the opportunity. Leading New Zealand white wear manufacturer, Fisher & Paykel expressed interest in a joint venture and teamed with BCI in 1989 to investigate the feasibility of an alternate telephone company. Revenues from telecommunications at the time were in excess of NZ$2 billion. Market research showed that most customers would be prepared to change to a competitor if prices were 10 to 20% lower than Telecoms.
Having emerged in September 1988, Broadcast Communications, with its microwave network for disseminating television signals, indicated a strong desire to be part of a BCI and Fisher & Paykel joint venture.
Due to effects of a weakening economy in the late eighties, Fisher & Paykel decided to bow out. The Wellington-based Todd Corporation was preparing for market entry with MCI.
Alternative Telecommunications Company Three independently researched business plans undertaken during this first phase of investigation of telecommunications opportunities were combined and expanded upon in an Alternative Telecommunications Company (ATC) business plan proposed by Touche Ross, (for TransPower, the bulk electricity network subsidiary of ECNZ), Booz Allen Hamilton (for New Zealand Railways) and Charles Gilmore, ex-General Manager of Telecom (for Todd Corporation) in March 1989.
The report confirmed that viable competition required a balance of established overseas telephone company expertise, commercial experience and funds, and State Owned Enterprise transmission network infrastructure. It also confirmed that the market place was big enough for just one major competitor to Telecom.
As the various parties began to align with each other, two groups emerged. Broadcasting Communications Limited (BCL), the subsidiary of TVNZ, teamed with BCI to publish a market study and business plan for the establishment of the Alternative Telecommunications Company. TVNZ was looking for the factor with would differentiate their alternate telecommunications company from Telecom.
At the helm of the BCI team was George Newton who had risen from telephone technician to executive level in the Canadian telecommunications giant. George Newton proceeded immediately to draw up the BCI/BCL business plan. With a team of fourteen to assist, he completed it on 8 December 1989, just four weeks after commencement.
By February 1990, BCL, TVNZ and BCI had signed a Heads of Agreement to work in partnership on an alternate telecommunications project. Todd Corporation, New Zealand Railways Corporation and American telecommunications company MCI were poised to do likewise. Both parties were aware of the need for more than one set of transmission facilities. TVNZ's microwave transmission and NZ Railway's fibre optic cable were both needed in the event of one failing. Both parties were also acutely aware that there was room for only one competitor in the New Zealand market.
Todd Corporation had not only struck a firm association with the second largest telecommunications network in the world, MCI, and with New Zealand Railways Corporation but had also been instrumental in persuading the SOEs to work together with encouraging results.
On November 29, 1989, Todd announced the formation of MCI Todd Communications Ltd. The new company would provide competing telecommunications services in New Zealand. Announcing the new company, John Todd, Chairman of the Todd Corporation, said it offered "a great opportunity to bring new technology and service products to the country's 2.4 million telephone users."
The international expertise and investment of MCI, together with New Zealand Railways fibre optic cable running along the North Island Main Trunk railway (between Auckland and Wellington) and the financial support of one of New Zealand's leading corporates constituted serious competition.
Todd MCI and BCI/BCL agreement Todd MCI had access to the North Island through New Zealand Railways' fibre optic cable. The BCI/BCL group had access to national coverage through BCL's microwave facility. George Newton convinced BCI's principals in North America to carry on with their venture. In March 1990, all of the parties, TVNZ, Todd, BCI and MCI met in the latter's offices in Washington. This began the merger process.
Both sides had prepared details for interconnection agreements but Neil Tuckwell, an Australian competitive telecommunications expert who had been contracted to TVNZ had, together with Robert Brydon, met the Minister of Commerce to discuss interconnection. In February 1990, the senior representatives of the two groups were brought together - Julian Mounter, Ted Trimmer, Senior Vice President Business Development for MCI, John Hunn, Stewart Berry, Vice President Sales for Bell Canada and George Newton. They worked out what was needed in New Zealand to set up a competitive company and agreed to work together.
On 20 April 1990, a Memorandum of Understanding to form a single organization to compete in the telecommunications industry was signed between the two consortiums. This led to the creation of The Alternate Telecommunications Company (ATC) on 1 August 1990, the four main shareholders being TVNZ, BCI, Todd Corporation and MCI. New Zealand Railways Corporation was to have Board representation and equity options.
The two business plans were then brought together - Todd MCI's venture was going to cost $80 million, and the BCI/BCL venture was to cost an estimated $125 million.
George Newton was appointed Chief Executive of the ATC and he and Robert Brydon, Ted Trimmer, Darryl Dorrington and Neil Tuckwell began work on the agreements needed before the company could begin trading.
Among the eighteen Conditions Precedent, the main ones included a Heads of Agreement with Telecom, a service agreement with BCL and New Zealand Railways Corporation (the Railways Corporation was split into two in October 1990, with the fibre optic circuits going to a new entity, New Zealand Rail Limited) to provide their respective microwave and fibre optic cable facilities, an agreement with TransPower, service agreements with BCI and MCI to contract experienced people from North America, approval from the Commerce Commission and foreign investment approval.
One of the roadblocks for new entrants had been the absence of a specific telecommunications regulatory body. Telecom had established the Permission to Connect (PTC) document, the lifeblood of the business. This meant that the dominant carrier was setting the rules. And since Telecom had not contemplated local service or 0800 service competition, the Agreement with Telecom would prove the most difficult to achieve. Staff en route from North America to join the new ATC told the minister, Richard Prebble, that they would cancel their network switch order due to the delays in getting an agreement with Telecom. ATC then agreed to defer cancelling while the Minister got Telecom to the table.
On 24 August 1990 Telecom had publicly welcomed the merger of the joint ventures and stated that competition was "healthy for the industry and would benefit all our customers." A memorandum of Agreement was signed with Telecom covering toll by-pass, alternative networks, local services and 0800.
A shareholders agreement was concluded and signed on 4 September and shareholders funds, available for the first time, were in excess of NZ$100 million. The four main shareholders would each initially have 25% equity.
ATC's first consignment of switching equipment arrived in New Zealand in November that year and installation commenced. Neil Tuckwell moved from TVNZ over to ATC. His move coincided with ATC's shift from temporary offices at Quay Tower in Auckland to permanent accommodation at 49 Symonds Street. In Wellington, the following month, ATC moved to permanent premises in Murphy Street.
Naming and logo The company's General Manager Sales and Marketing David Patten asked Sandy Fain to come up with the company name and logo. Fain briefed Leo Burnett on the company's values. 25 names were considered before arriving at Clear Communications. The logo "reflected the clean, bright colours of New Zealand."
On 14 November 1990, the first full board meeting of the new company was held with John Ede as Chairman of the Board and George Newton CEO. The board confirmed the name which was unveiled to staff on a plinth in the lobby of the company headquarters.
Commencement of services