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'Olde tyme' telecoms regulations up for review

Tuesday 9th July 2013

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Rules requiring Telecom and Chorus to provide free local calling, internet dial-up connections and a free listing in the telephone book are up for review in a discussion document released by Communications Minister Amy Adams.

However, industry watchers are far more anxious to see a delayed discussion document into the rules that will apply to telecommunications in emerging ultra-fast broadband and mobile markets than the review of obligations that relate to the telecommunications sector as it was in the past.

The latest discussion document relates to the Telecommunications Service Obligations, established in 2001, and which were derived from the Kiwi Share arrangements that accompanied the privatisation of Telecom in 1990.

The proposed changes would seek to make the obligations "competitively neutral" instead of applying only to Telecom and Chorus, would retain free calling, and continue to moderate monthly telephone line rental charges by fixing increases to inflation rates.

Under some of the proposals, the TSO would apply only in areas that were remote or lacking in competition, although free local calling would be retained under all three proposed options for reform.

Chorus general counsel Vanessa Oakley welcomed the review as an opportunity to create "a fit for purpose TSO framework that acknowledges the significant change in industry structure and the government's fibre vision."

The terms of the TSO had been superseded by regulated pricing under standard terms determinations, its contract with the government to roll out ultra-fast broadband to urban areas, the terms of the rural broadband initiative contracts, and open access deeds of undertaking.

"There is currently no Consumers Price Index or other adjustment in Chorus's prices," she said in a statement. "Chorus will need to consider carefully any economic impact of any proposal to extend its TSO obligations."

The discussion document says change to the TSO is needed now because the current arrangement "locks Telecom into continuing to use older 'legacy' technology that will be replaced over time."

"The current TSO does not allow Telecom to use the most cost-effective and modern technology to provide TSO services, potentially delaying availability of cheaper and more innovative services", while the minimum internet speeds set out in the TSO were "very dated" and slow.

"TSO protections appear redundant for most homes (predominantly those in urban areas), because alternative services at attractive prices are available from competitors in most parts of the country."

The fact that telecoms service providers other than Telecom and Chorus faced no obligations also imposed costs on those two players, meaning the system is not "competitively neutral."

Three options, ranging from minimal to substantial changes to the TSO, are outlined. All retain free local calling, but the minimal reform option would do no more than replace the requirement for dial-up internet connection with a requirement to "provide access to the internet."

Use of the CPI as the inflation index for fixed line monthly rental prices would change to the Producers Price Index, although his could lock in historic over-recovery of costs by the TSO providers.

The "medium change" option would apply the TSO only to areas where it was needed, such as remote communities, areas of minimal competition, or those not covered by the UFB or RBI initiatives.

Telecom would be able to set commercial prices for monthly line rentals while retaining free local calling.

Under the third option, the paper proposes making TSO contestable in defined areas, such as those outlined in option two, with the winning bidder applying for the lowest subsidies from the Telecommunications Development Fund.

Meanwhile, a discussion paper due on UFB regulation from the Ministry of Business, Innovation and Employment by June 30 has yet to emerge.

"We look forward to the release of the government's wider discussion document on the regulatory framework," said Chorus's Oakley. "This will form a significant part of the discussion on a coherent framework that ensures a sustainable and efficient transition to fibre for the years ahead, of which TSO is a part."

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