Opinion: A tale of two telco reviews

Telecommunications regulation is once again in the spotlight

Sometime in the next month the government is expected to release a discussion paper on its review of the telecommunications regulatory framework. This review was announced by ICT Minister Amy Adams in February.

Reviews are always both an opportunity and a challenge. I want to see this review thoroughly test the basis of our current regulatory framework – and only then look to changes if required. Users of telco services have done well out of the status quo, so changes should face a high bar.

It’s almost as if two reviews are happening at once. Chorus, the communications network company building most of the Ultra Fast Broadband rollout has concerns about its viability without regulatory change; the government seeks a stable and orderly transition from copper to fibre broadband.

Chorus raised concerns with a draft price for copper broadband services announced by the Commerce Commission in December. They fear the draft price could put the UFB rollout at risk. It seems Chorus’ business case for the UFB contract relied on the maintenance of higher copper broadband prices than many industry insiders expected.

Chorus’ ability to complete the UFB rollout matters to all, and Chorus must be hoping that this review tackles their concerns. Chorus wants a higher price for copper than the draft proposed by the Commission. That may mean higher prices for consumers, if it comes about.

Here’s a plea to Chorus: set out clearly and publicly why the proposed copper price is such a problem, why commercial decisions can’t mitigate this problem without regulatory change, and what framework is seen as preferable.

That’s one review: the government’s angle is the other. Comments by prime minister John Key initially indicated Chorus was the focus, but Adams is on record arguing a different point: by bringing parts of the scheduled regulatory policy review forward from 2016 to this year, the government can look into the issue attracting the most concern – whether the current regulatory framework is the right one to support the migration from copper to fibre broadband services. Chorus at least is a significantly interested party in that matter, because of the concerns discussed above. So is government, because it is a multi-billion dollar investor in the telecommunications industry for the first time since the 1980s.

A careful, unhurried and inclusive review of that key question shouldn’t do the industry any harm – aside from the uncertainty any review creates. Government has already decided to defer the new copper price to 2015, so there is no rush. Good – this review could have huge ramifications, depending on how it’s handled.

Here’s why: ever since privatisation, telecommunications regulation has been based on a clear presumption that regulators won’t try to pick winners in the technology race. The fight for customers is driven by competition - between networks, technologies and companies on a level playing field, independently overseen by the Commerce Commission. Targeted regulatory action has tackled competition problems (when needed) to support a dynamic telecommunications market.

That framework has served users well. Prices have fallen, choice has expanded and services have improved – in fixed line broadband, in mobile internet access, as well as for calling and texting.

The UFB’s very existence, while hugely important for New Zealand’s economic future, creates a tension for government. Suddenly it has investment interests at stake too. That’s why this review is a big deal. The regulatory and policy wing of the government should set aside its own commercial interests, maintain the level playing field, and do right by customers.

There’s no need to pick a winner by regulatory means. The speed and service quality that fibre broadband offers will see customers migrating to it in droves. The UFB teething troubles we see today will fade as the biggest retailers grow their marketing campaigns, and as Chorus improves the installation experience for end users through practice making perfect.

This review may find change is needed, or that the existing settings are the least-worst option. There are never perfect regulatory frameworks: the interests of the public, the investors, the consumers and providers are all different.

What suits one won’t suit another. The threshold for change should be high. All power to Amy Adams as the review proceeds.

Carter is acting CEO of InternetNZ

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