Telecom has responded to today’s announcement by communications minister Steven Joyce that the Telecommunications Service Obligation (TSO) levy will be replaced by a telecommunications development levy.
In a statement on the NZ Stock Exchange, Telecom notes “In recent years we have been participating in an industry-wide push to secure reform of the TSO arrangements.
“This reform is long overdue, and needs to be based on principles of contestability, transparency and technology neutrality.
“It is equally important that any subsidies applied to fund services to uneconomic customers are borne equally by all consumers, and not just Telecom’s,” the statement notes.
The announcement of reform of the TSO is tied up with the government’s $300 million rural broadband initiative.
In today’s announcement, Joyce notes “We’re proposing to fund the $300 million rural initiative through a combination of direct government funding and revenue from a more transparent and effective levy than the current TSO levy”.
According to the announcement, the government will provide $48 million upfront, and a further $52 million in interim funding, with the rest “to be sourced by replacing the existing TSO industry funding with a more transparent contestable industry-wide mechanism that focuses on developing rural telecommunications”.
Regarding the current TSO, the announcement notes “The existing TSO levy has been in place since 2001 and has been a source of considerable controversy within the industry. A recent review of the TSO had identified that the current methodology for assessing how much the TSO commitment was costing Telecom a year was flawed.”
The government is aiming to change the methodology for how Telecom is compensated for servicing uneconomic customers. Such a change, which calculates both the costs and benefits of the TSO, may result in revenue form the levy declining dramatically.
The new levy will aim to generate $50 million a year, less than the $70 million the current TSO levy brings in.
The reform of the TSO levy is separate to the TSO obligation, which mandates that Telecom provide free local calls.