Rural telco levy liability: Chorus in, Sky out

Commerce Commission releases preliminary view on who should contribute to levy

Chorus is liable for a share of the Telecommunications Development Levy for the first year, the Commerce Commission has provisionally decided.

The TDL, which replaces the old Telecommunications Service Obligation (TSO), is charged to “liable” telecommunications operators and will fund the majority of the Rural Broadband Initiative.

Chorus pleaded that it shouldn’t be liable to pay the levy for the 2011/2012 year because it was not a separately incorporated company in the preceding year, it was part of Telecom.

The commission disagrees, in its Draft Notification of Potential Liability for the Telecommunications Development Levy 2012, published on April 19.

“Whether or not Chorus was incorporated in the previous financial year is not the decisive point,” it says “The Commission considers that Chorus was carrying on business (appropriately then constituted) as the operationally separated business unit of Telecom. In addition to the fact that the assets, management, operations and personnel have continued to operate throughout the separation process, the evidence indicates that Chorus Limited continues to be comprised of the trading “person” that existed prior to [structural] separation.

“Therefore, it is clear that Chorus is a liable person under section 81(1) of the [Telecommunications] Act,” the draft finding says.

Sky TV’s position that it is not liable for a TDL contribution has, however, been accepted, “on the basis that it does not operate a component of a telecommunications network”.

Telecom contended that Sky in supplying a video-on-demand service that does not constitute broadcasting to the public, is a telecommunications operator.

The Act requires, however, that to be liable for the levy a company must “operate a component of the public telecommunications network (PTN).”

In order for a network to be part of the PTN, “there must be means by which a member of the public … can feasibly obtain access to the network and use it to communicate with other persons.” This is not so in the case of Sky’s network, the commission has decided.

“Sky submitted that its content is delivered from Orcon’s Content Delivery Network to internet service providers which deliver the content to end-users. Therefore, Sky submitted that it is not itself operating any component of the PTN over which its service is delivered”. This position was accepted.

“Retail and wholesale voice and broadband service providers, mobile voice operators, and ISPs excluding pure resellers are liable persons,” the commission says. “This group includes those previously captured by the TSO, plus VoIP operators and ISPs.

“In addition, wholesale service providers, such as local access network or backhaul service providers, are liable persons. Pure resellers are not liable persons as they do not operate a component of the PTN.”

Interested parties have an opportunity to make submissions on the list of potentially liable persons by 5pm on Wednesday 9 May 2012. Cross-submissions will then be accepted up to 5pm on Wednesday 23 May 2012.

After this, the commission will embark on the process of apportioning the levy among the liable parties.

“The Commission will prepare a draft information request for the purposes of prescribing qualified revenue for consultation within the next month. Following consultation with parties, the Commission will issue a notice for additional information to be used to calculate qualified revenue that liable persons will be required to produce for the Commission for the purposes of determining their TSO liability.

“After that information is received, the Commission will issue its draft TDL liability determination in accordance with section 88 of the Act.”

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