Commission releases draft determination on Telecommunications Act

Media release

Wednesday 13th April 2005

The Commerce Commission has issued its draft determination on applications by TelstraClear Limited and Telecom New Zealand Limited for a review of the interconnection price set under the Telecommunications Act 2001.

Both TelstraClear and Telecom applied for a review of the price of 1.13 cents per minute set by the Commission in November 2002 for interconnection between the Telecom and TelstraClear fixed networks. The interconnection price is the per minute charge payable by one carrier to the other for handling various call types between the two networks.

In its draft determination released today, the Commission has set a lower price of 1 cent per minute for interconnection in respect of the period from June 2002 up to the date of the Commission's final price determination. The companies will be required to reimburse each other for prior over payments.

The Commission invites submissions from interested parties on its draft determination by 9 May 2005, and cross-submissions by 23 May 2005.

The initial price was set by benchmarking against prices in comparable countries. The price review has used a more rigorous approach of modelling the specific network costs of interconnection, known as Total Service Long Run Incremental Cost (TSLRIC). The Commission has built a costing model of parts of Telecom's network to calculate this cost, and has also reviewed a calculation provided by Telecom.

Telecom had earlier challenged the scope of the Commission's power to carry out this pricing review and to determine the commencement and expiry dates of the determination. The High Court last week dismissed Telecom's challenge and ruled that the Commission does have jurisdiction to adjudicate these matters (Telecom New Zealand Limited v Commerce Commission & TelstraClear Limited).

Background
On 15 November 2002, TelstraClear filed an application with the Commission under section 42 of the Act seeking a review of the price set by Decision 477 for interconnection with Telecom's fixed PSTN.

On 26 November 2002, Telecom filed two applications, under section 42, requesting that the Commission review the initial price set in Decision 477 in regard to, respectively, interconnection with Telecom's fixed PSTN and interconnection with TelstraClear's fixed PSTN.

On 10 January 2003, the Commission informed the Parties that all aspects of the individual applications will be addressed within the one pricing review determination.

On 24 February 2003, the Commission received a joint letter from the Parties stating that they had agreed that the final price for interconnection with TelstraClear's fixed PSTN will be the same as the price determined by the Commission for interconnection with Telecom's fixed PSTN.

The Commission has consulted extensively with the industry on the correct process for modelling TSLRIC prices, publishing several discussion papers and seeking submissions.

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