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Telecom commission releases draft report


Friday 29th November 2002

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The Commerce Commission today released its draft determination on TelstraClear's application to allow the resale of some services offered by Telecom.

For several telephone companies, importantly TelstraClear, wholesale costs are a bigger portion of costs than interconnection costs.

It initially ruled that the appropriate discount range for New Zealand is between 14.8 and 18.05 percent before adjustment for additional costs associated with wholesaling.

TelstraClear applied to the commissioner for a wholesale price determination of all Telecom's retail services -- except local calls for which TelstraClear has made a separate application.

The commission undertook a benchmarking exercise looking at wholesale discounts offered in 47 states.

The discount range could potentially apply to 212 services, depending on the level of competition in various markets, the commission's network acceess manager, Osmond Borthwick, said. It was important to bear in mind that it was early in the process and the commission was presenting preliminary views, he added.

The parties will have the chance to make submissions and a conference on the subject would be held before the end of the year.

The commission's final determination would be released early in 2003.

Telecom chief operating officer Simon Moutter said Telecom had an initial basic concern that the draft determination appeared to go much further than the regulatory regime in Australia and covered a far greater range of services.

"In addition, the commission doesn't seem to acknowledge that much of the telecommunications market in New Zealand is already competitive.

"Compare that with the situation in Australia where the Australian regulator has made a call to unregulate access in central business districts where there is competing infrastructure."

"Not recognising the fact the New Zealand market is competitive would be an astonishing failure because the Telecommunications Act requires different wholesaling rules depending on the degree of competition in particular markets," Mr Moutter said.

Telecom said it would put a "massive amount" of effort into examining the draft decision because it believed it was vital the Telecommunications Commissioner made the right call.

"His decision will have a huge impact on investment in New Zealand's telecommunications infrastructure."

This is the second major decision by the commissioner to go against Telecom. It has taken exception to the price of interconnection set for calls between its own network and TelstraClear's.

The commissioner recently ruled it should be 1.13c per minute -- below the 1.21c to 1.42c per minute estimate in his draft determination and half what Telecom had been charging competitors.

Telecom repeated its threat to halt investment in its network.

"As we've said before, why would we continue to invest at our current high levels if the benefits are immediately siphoned off by our competitors?" Mr Moutter said.

Mr Moutter said Telecom was concerned at the process that gave just nine working days from today to respond to a very detailed draft decision, which raises more questions than it answers.

"Speedy resolution of disputes is great. But it's not helping anyone if it produces incomplete decisions. As we've already seen with interconnection, there's no guarantee that the final decision will even stay within the bounds indicated by the draft."

Despite the ruling, Telecom shares were up six cents to $4.83 today in an otherwise flat sharemarket.

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