Carriers group wants TSO opened to competition

Funding for TSO should come out of tax take, says TCF

The Telecommunications Carriers’ Forum (TCF) has delivered its report on the Telecommunications Service Obligation (TSO), formerly known as the Kiwi Share, and has submitted its recommendations to government.

The TSO defines a basic phone service and internet access which Telecom must provides to rural and other customers even where these services are not economic. It was created when Telecom was privatised in 1990 and updated and renamed in 2001. It imposes obligations on Telecom including an inflation-adjusted price cap and a requirement to maintain a free local-calling.

“There is a strong case for the existing TSO arrangements to be reformed given the very significant changes in technology and the competitive environment that have occurred since the TSO was first established,” TCF CEO Ralph Chivers says. He says these changes are so significant the TSO needs to be redesigned "from the ground up”. “The TCF also believes that it is time for the TSO to be opened up to competition by allowing other companies to tender to be the TSO provider. There are a range of telecommunications companies, employing a range of technologies including wireless, who are now in a good position to provide TSO services to the more difficult to serve areas of New Zealand,” Chivers says. He adds that competition is already delivering a range of packages and calling options in excess of what the TSO requires and for a lower price in some areas.  "One has to question whether a formal TSO obligation is still needed in these areas,” he says.

“The recommendations in the Report will be excellent for consumers,” says Telecommunications Users Association CEO Ernie Newman, who describes the current scheme as "bizarre economics".

“The old Kiwi Share was devised at a time when Telecom was a monopoly service across most of New Zealand. It assumed that Telecom was the only practical supplier of services to more isolated areas, which is no longer the case.

“It has actually held back the emergence of competition by not only giving Telecom a position of privilege in rural areas, but requiring other service providers to make a substantial cash payment to Telecom to subsidise its losses in those areas."

Newman says the recommendations will remove a significant barrier to competition.

“There are adequate safeguards in the recommendations to safeguard the interests of users, and we are comfortable that every New Zealander will continue to receive a satisfactory basic voice service," he says. Other recommendations:

  • continuing with free-local calling in TSO areas;
  • moving to a funding model based on general taxation;
  • moving away from Telecom-centric obligations to industry “codes of practice” for matters such as call quality and emergency services calls; and
  • maintaining a clear separation between the TSO and any initiatives to increase the uptake of broadband.

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