Select Committee majority recommends telco bill

InternetNZ claims major flaws in proposed legislation, TelstraClear says no material change

The Finance and Expenditure committee has recommended that the controversial Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill be passed – with some changes.

The recommendation is a majority decision. The minority view, expressed by Labour, Greens and Act show these parties are strongly opposed to the Bill in its present form.

But Committee chair Craig Foss says the following changes will provide more clarity. He also points out that by bringing forward the date of the general review of the Act to 30 September 2016, a review of the legislation is only five years away.

Regulatory Forbearance period

The report recommends that the so-called regulatory holiday remain – this would mean the Commerce Commission had no oversight into pricing, nor could it require unbundling of the fibre network until 2020. The alternative suggestion – a special access undertaking regime - was rejected by the majority of the committee. However, the following amendments were made:

  • The Commission is permitted to collect information about the Local Fibre Cos (the regional public private entity set up to build the network) during the forbearance period.
  • The forbearance period ends if the private partner terminates the UFB contract with the Crown.
  • A general review of the Act to begin by 30 September 2016 – rather than 1 January 2018.
  • Equivalence of Inputs – that is the LFC must offer access seekers the same terms and conditions as it does to itself – will apply from the date at which layer 1 (dark fibre) services can be unbundled (1 January 2020).
  • A breach of undertakings could incur a $10 million penalty.

Not in breach of WTO

The Committee sought advice from the Ministry of Foreign Affairs and Trade, who assured the Committee the regulatory forbearance period was not in breach of the World Trade Organisation General Agreement on Trade in Services, which apparently requires an independent regulator to oversee price and non-price terms for interconnection.

“The ministry advised us, and provided a summary letter confirming, that the provisions in the bill would not breach these international standards," the report states.

Averaging of copper prices

The controversial move towards averaging unbundled copper local loop prices remains. Opponents such as TelstraClear CEO Allan Freeth have claimed this move could raise the price of services on the copper network by 20 percent. But the majority of the committee appear unconvinced.

“This averaging of copper prices would occur only if Telecom was successful in its bid to become a UFB partner to the Crown in deploying the UFB network,” the report states.

“This averaging is necessary because under the TSO, Telecom, unlike its competitors, has to provide national pricing for some services, despite facing de-averaged input prices, and therefore cross-subsidises them ... Telecom faces profit erosion in this area, and a structurally separated Telecom could no longer cross-subsidise losses between the new Telecom and Chorus entities.”

InternetNZ claims major flaws

"The Committee is recommending some notable small improvements to the Bill, but major flaws remain,” says InternetNZ Chief Executive Vikram Kumar in a statement today.

“The tragedy is in both cases there were ready fixes available to the Government members, which could have solved the problems both cause. In any case, with Labour promising to overturn the regulatory holiday, its value in providing price certainty for investors is questionable.

“I regret the alternatives suggested were not taken up. The result is that telecommunications legislation is going to remain contentious until at least the full review scheduled for five years from today. That is instability the industry simply didn’t want, and didn’t need.

“We do welcome small changes the Committee has made to the Bill. There are bigger penalties for breaches to LFC undertakings; a requirement for the Minister to consult the Commerce Commission for some decisions, and a useful narrowing of the broad power the Minister would have had to spend funds from the Telecommunications Development Levy on almost anything."

Kumar says that assuming the government has the support of the Maori Party, the bill should be passed into law following its second and third reading in parliament.

Foss wasn't saying which committee members voted for or against the bill (its a breach of in committee rules), however there is widespread speculation that the Maori Party was brought into line with the Bill following the establishment of Nga Pu Waea, an organisation formed to advise on Maori issues in the RBI, who's mandate may be extended to the UFB.

TelstraClear says no material change

TelstaClear CEO Allan Freeth has issued a statement claiming the Committee's majority recommendation of the Bill will mean "Consumers will now face a decade without a referee watching over competition in the ultra fast broadband space."

The Finance and Expenditure Select Committee report today recommended no material change to the major problem areas of the Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill, which has now returned to the House for its second reading.

“Given Minister Joyce’s unwavering faith in his own views and the politics of the whole situation, I am hardly surprised by the outcome,” Freeth says. “But I am disappointed by the lack of respect shown by the Minister to the industry and consumer groups alike, and the inevitable cost and loss of choice for New Zealanders.”

“I had hoped this Government would have learned from recent history which has seen Telecom fined a record $12 million for anti-competitive behaviour, and mobile termination rates forced down only after action by the Commerce Commission.

TelstraClear has conducted a high profile advertising campaign opposing the bill.

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Tags telecommunications (tsovikram kumarallan freethand Other Matters) Amendment BillinternetnzTelstraClearbroadband

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