Telco service levy increases $10.7 million year-on-year

TSO takes another bite ahead of being scrapped

The Commerce Comission has increased the telecommunication service obligations levy for the 2007-2008 year to $72.1 million, compared with $70.7 million in its draft determination — a $10.7 million increase over the previous year.

The TSO is a levy on the telecommunications industry to pay for residential phone services to customers that would not otherwise receive them - customers that are considered uneconomic but whom Telecom is obliged to serve at an affordable price due to regulatory requirements.

Last week, the government announced it planned to scrap the levy and replace it with a development charge to fund its rural broadband rollout.

"The final TSO cost has increased from the amount calculated in the draft determination, which was $70.7 million," a Commerce Commission statement released today says. "This change has largely been due to a change in the weighted average cost of capital (WACC) used between the draft and the final determinations. In the draft, the commission used a WACC of 6.8 percent. This was revised upwards to 6.9 per cent in the final determination."

The TSO cost for the year has increased by $10.7 million from the 2006-2007 year, also because of changes in the weighted average cost of capital.

The Commerce Commission also released its telecommunication service obligations determination for the 2006-2007 year today, at $61.36 million. This decreased from the draft determination, which was $62.86 million.

The total cost will be shared between Telecom, TelstraClear, WorldxChange, Vodafone, CallPlus, Compass, Teamtalk, Woosh, Airnet, Orcon and 2degrees in proportion to their liable revenues. Telecom bears approximately 67 percent of the TSO cost, Vodafone bears 26 percent, TelstraClear 6 percent with 1 percent shared between the remaining companies.

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