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Kiwi Share must be overhauled - Telecom

By Phil Boeyen, ShareChat Business News Editor

Friday 29th September 2000

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Telecom is once again calling for the Kiwi Share scheme to be overhauled, claiming it is subsidising 380,000 mainly rural and small town customers to the tune of $167 million a year.

The telco says the $167 million audited figure replaces an earlier estimate of up to $120 million which it issued in July to assist the Telecommunications Inquiry.

Under the Kiwi Share, Telecom is required to maintain residential local telephone service at least as widely as it existed in 1990, to preserve unlimited free local calling and to ensure that monthly line rentals are no higher in real terms than they were in 1990.

Telecom spokesman, Bruce Parkes, says his company has always adhered to the Kiwi Share but it is ten years old this month and requires a major overhaul.

"The size of the existing subsidy to rural customers throws into stark relief the issue associated with the rural Internet service. It costs Telecom $167 million to subsidise a good performing rural network to carry voice calls. To upgrade the rural network to carry city level Internet access would require investment of another $500 million, for which Telecom would receive very little extra revenue."

Mr Parkes says the new disclosures provide a much better understanding of the economics involved in the local service currently provided by Telecom throughout New Zealand.

"The key policy issue it raises is how in a competitive market this level of subsidy can be sustained."

Telecom says its competitors who want to interconnect with the rural network should pay their fair share of the burden.

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