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Telecom split quashes economic incentive to squeeze out retailers, regulator says

Thursday 1st March 2012

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The Commerce Commission is happy with last year’s structural separation of phone company Telecom and its network unit Chorus, saying there’s no economic incentive for the remaining entities to shoulder out their rivals.

Telecommunications Commissioner Ross Patterson told Parliament’s Commerce Committee that Telecom’s demerger was a “game changer” and that there isn’t any sweetener for the phone company and network operator Chorus to disadvantage competitors. Under operational separation, there was still an incentive for Chorus to discriminate against Telecom’s rivals, and that required close scrutiny.

“The issue has always been how a vertically integrated monopoly provider leveraged that monopoly,” Patterson said. “When you look at Telecom now, it’s a standalone retailer that has no advantage over competitors and is trying to compete, really for the first time, on even terms.”

Chorus, as a monopoly provider of the base fibre network, has “no incentive to favour any retailer over another,” he said.

Telecom carved out its network business last year in return for access to $1 billion of taxpayer funds to build a nationwide fibre network and shed regulatory burdens.

Patterson said he was pleased with Two Degrees Mobile’s impact on mobile phone competition, with the mobile provider grabbing 18 percent of the market since its launch in 2009.

When questioned on whether he had any concerns about the regulation of video content delivered over the internet, Patterson said the matter is under consideration, but that those services are covered by the Telecommunications Act.

“Video on demand, which is the likely driver of (broadband) uptake, is a telecommunications issue and is subject to all provisions of the Telecommunications Act,” he said.

The inclusion of content arrangements in a Commerce Commission study into the drivers for ultra-fast broadband uptake rankled with pay-TV operator Sky Network Television, who unsuccessfully argued it would turn into a quasi-regulatory inquiry into broadcasting.


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