ICT Minister Steven Joyce appears to have rejected a suggestion by 11 telcos and industry groups that legislation to enact Ultra Fast Broadband be changed to enable regulatory oversight into pricing during the first decade of the build.
The group, led by TUANZ, had suggested that Special Access Undertakings (SAU) could be a viable alternative to the proposed regulatory forbearance period. These Undertakings would, according to the statement released by TUANZ today, provide price certainty for the government's partners as well as Commerce Commission oversight into pricing.
But in a written response to Computerworld, ICT Minister Steven Joyce identifies “two pretty obvious problems with the proposal”.
No price certainty
“As described by TUANZ in its release, it doesn’t appear that bidders would have the certainty over the price book that they need during the crucial build phase of the network. Their release says that the Commission would have the opportunity to “review and approve price terms in an SAU”; which presumably means that the Commerce Commission would have the opportunity to change its view over the 8 ½ year period,” Joyce says.
“The alternative, ie that the Commission doesn’t have that ability to review the SAU once set; would mean that, in effect, The SAU is the same as Regulatory Forbearance on prices.”
Too long to arrange
“An SAU would take a significant period of time to arrange. My understanding is that it would involve a minimum period of a year from start to finish; including submissions, cross-submissions etc. This would all need to happen before contracts could be confirmed. Given that retailers have indicated their support for the wholesale price book as publicised, I’m not sure this adds anything except a delay in the UFB for no particular benefit,” says Joyce.
Open to alternatives
Joyce says he is open to looking at alternatives. “But it is important to note that however it is done; infrastructure builders will need to have certainty as to the maximum prices they are able to charge in the early years of a new fibre access network. It's important that stakeholders who “fully support broadband infrastructure investment” by the Government are prepared to offer infrastructure builders sufficient certainty in what is effectively a PPP arrangement so that they are prepared to do the job.”
Telecom spokesperson Ian Bonnar says the company would need to review the SAU proposal in detail, but he provided the following comment by email. “The key issue is creating a regulatory environment that both delivers for consumers while also providing enough certainty to be able to attract billions of dollars of private investment, no matter who is selected as the Crown’s UFB partner. “We feel that a period of contracted pricing is one appropriate method of providing investors with certainty, so we have supported this approach on that basis. “Naturally, if the private sector is to commit the very large sums involved we expect that any bidder would want to be able to rely on any contracts signed with CFH, but ultimately it is the Crown’s decision how and if it seeks to provide the industry with certainty.” New Zealand Regional Fibre Group in favour of SAU
NZRFG CEO Vaughan Baker says members of his organisation – which include companies that are competiting directly with Telecom for areas of the UFB, such as Vector in Auckland and Enable Networks in Christchurch – are in favour of the SAU.
Indeed, Baker says the NZRFG recommended that SAU's be put in place as a further enhancement of the proposed regulatory framework for UFB in its submission to the Telecommunications Amendment Bill on 15 March. He referred Computerworld to the following section of NZRFG submission:
“Introduce an anticipatory Special Access Undertakings (SAU) framework so that LFCs can seek and agree upfront regulatory undertakings (including on price) with the Commission, prior to a formal decision to regulate LFCs. This proposal is similar to that already applied in Australia, which was designed, among other reasons, to provide regulatory certainty for large new infrastructure projects.”
Labour gives cautious support
Labour ICT spokesperson Clare Curran sent out a press release today offering “qualified support” for the SAU proposal.
"Labour will examine the proposed solution in detail, but supports any added protection for New Zealand consumers and fair pricing for access to our newest network," she says.
"We ask the Minister to consider the telecommunication industry's request for an Australian-style special access undertakings approach. This approach would replace the anti-competitive regulatory holiday and bring Commerce Commission oversight back to oversee ultrafast broadband prices and services.
"Labour will continue to oppose the 10-year regulatory holiday period proposed in the Government's new telco Bill and will review it, and possibly repeal it should we be elected at the end of this year.”