Opinion: The future of universal service

Sarah Putt considers the upcoming review of the Telecommunications Service Obligation

The right to a decent phone service wherever you live has been protected by New Zealand law since Telecom was sold into private hands in 1990.

Under the Telecommunications Service Obligation (TSO), Telecom was required to provide a phone service to every New Zealander, at the same monthly rental regardless of where they lived. When Telecom was structurally separated two years ago, the obligation became shared between Telecom and Chorus.

The Ministry of Business, Innovation and Employment (MBIE) is now reviewing the legal obligations to rural communities that have been imposed on the telcos in a process called the TSO Review.

Under the original TSO model the amount of funding was based on what it cost to subsidise the rural phone service. The process of determining this amount was overseen by the Commerce Commission. Telcos had to pay a percentage of the TSO fund, depending on how big their revenue was. All the money then went to Telecom, because it owned the copper network on which the phone service was delivered. This model became increasingly controversial with Vodafone regularly issuing a challenge in the courts over the amount it was forced to contribute to the TSO.

The National government replaced the TSO fund with the Telecommunications Development Levy in 2011 and set the amount at $50 million a year until 2016. On Monday the Commerce Commission issued a draft determination as to how much each telco will pay.

The levy – together with a $48 million taxpayer grant – is used to fund the Rural Broadband Initiative. When the RBI is built, the levy will reduce to $10 million a year and be used to fund the deaf relay service (captioned telephony for the hearing impaired). It may also fund an upgrade of the emergency services calling network.

The TSO review – which is being undertaken alongside a general review of telecommunications legislation – will consider a number of questions. Not least of all, is a broadband service fundamental to health, wellbeing and education of rural communities – and is it the government’s role to ensure rural people gain access to broadband at the same price as those who live in cities?

Meanwhile, the government is about to divvy up a valuable natural resource called the 700MHz spectrum. Depending on who gets a slice and how it’s used, the results of the spectrum could have major impact on rural connectivity. The spectrum becomes free when analogue television is switched off later this year and it’s valuable to mobile telcos because it enables what’s referred to as ‘4G technology’ – basically faster broadband speeds and wider coverage.

The new towers being built as part of RBI must be upgraded to accommodate this new service and over the next three months Vodafone is trialling 4G technology in the Lake Brunner area of the South Island's West Coast using 700 MHz spectrum.

The Telecommunications Users Association (TUANZ) pushed for a kind of discount or form of preferential treatment when allocating the spectrum for those mobile operators who promised rural deployment. TUANZ argued it could deliver faster connectivity to rural communities who were being forced to settle for 5Mbps under the RBI, while city dwellers are promised up to 100Mbps.

But the government has decided not to follow that model and is proposing an auction, with some conditions around coverage, instead. A draft consultation document on how the auction will proceed was made public last week.

This article is the fifth in a series written by Computerworld editor Sarah Putt about the Rural Broadband Initiative for www.nzfarmer.co.nz this week. Articles published in the series are: Curing community ills, Schools lead the way, Options for broadband customers, and Rural broadband on the agenda.

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