Telcos slam govt paper on structural separation

Where's the vision?, asks Vodafone

A Ministry of Economic Development (MED) paper asking for comment on Telecom’s proposal to structurally separate, has drawn fire from industry players.

Telecom will only structurally separate if it gets the lion share of the government’s $1.5 billion broadband network, but that hasn’t stopped its competitors from contemplating a future without a vertically integrated incumbent – and lamenting a lack of vision from government agencies over the handling of regulation around the UFB.

“We are very concerned that the Discussion Document seems to understate the importance of the relationship between copper regulation and fibre regulation whilst acknowledging the importance of “regulatory consistency”, Telecom stated in its submission. “The proposal is that Crown Fibre Holdings regulates fibre in the LFC contracts, whilst the Commerce Commission continues to regulate copper.”

“Without consistency between the two regimes, and the left hand knowing in detail what the right hand is doing, the all-important migration from copper to fibre will be significantly slowed down and Chorus2 and other industry investors would be left with an uncertain regulatory environment."

Vodafone notes the lack of any in-depth discussion over regulation of fibre services. “It is odd to not even refer to the outcomes from the UFB, their impact on the copper regulatory regime, or the relationship between the regulation of fibre and copper services if Chorus is to be the major provider of both,” the Vodafone submission states.

“It presents no vision – the discussion document seems to be merely a summary of the minimum set of changes required for the existing regulatory regime to work in a structurally separated environment. This is insufficiently bold.”

TelstraClear points out the current fragmentation of regulation in its submission: “A lesson to be learnt from the current operational separation regime is that it inefficiently fragments regulatory responsibilities between the Minister/MED, the IOG [Independent Oversight Group – a quasi-Telecom body that rules on operational separation violations] and the Commission.”

TelstraClear’s submission suggests that the Commission, as the independent regulator, should approve and enforce structural separation undertakings and oversee the migration from copper to fibre services.

The Commission in its submission also appears to criticise the MED's paper. It says the “interdependencies of the fibre and copper network cannot be ignored in this discussion.” It is concerned over the MED’s preliminary view that the unbundled copper local loop (UCLL) prices should be averaged, which it claims reverses a decision previously made by the Commission after extensive consultation with industry.

The Commission also queries whether the MED has the interests of end-users at its heart in this paper: “The discussion paper lists as one of its principles ‘the promotion of competition in telecommunications markets for the long term benefit of end- users of telecommunications markets in New Zealand’, however the proposals in the paper itself, appear to the Commission to be concerned predominantly with benefits to investors than the welfare of end-users. The conflicting interests require a balancing which is absent from the discussion paper.”

2degrees, in a submission written by its founder Tex Edwards, claims the UFB is an opportunity to “fix the regulatory environment for the next decade”. It asks for a Ministerial vision statement for the entire telco industry, a reform of the Telecommunications Carriers Forum (which 2degrees has recently rejoined), a review of competition law as it applies to telcos, a review of the Telecommunications Service Obligation (TSO) and, perhaps crucially to 2degrees, that the cell towers become part of Chorus2, rather than ServiceTel.

The company also suggests that MED staff look to international best practice when developing policy issues. “We believe that an MED task force should fly to countries where we aspire to replicate to seek counsel with peer groups of policy makers and discuss the frameworks which have led to the current market structures.”

The MED received a 17 submissions to its discussion paper on the regulatory implications of structural separation, which can be read online here.

Crown Fibre Holdings is expected to announce the companies it will partner with in the UFB this month. It has already announced partners in three regional areas.

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