Telecom holds out for 10-year 'regulatory holiday' on UFB

Paul Reynolds and David Cunliffe debate regulation in a fibre world

Telecom CEO Paul Reynolds has held out for the 10-year regulatory forbearance period as promoting more certainty for investors, when discussing amendments to the Telecommunications Act before Parliament’s Finance and Expenditure Select Committee this afternoon.

Reynolds even hinted that he would not have objected to the period being longer.

Fibre networks overseas have a payback period as long as 20 years, Reynolds says. “If it were longer than [the present provision] it would let us manage the process better.”

A different, less complex and restrictive regime is appropriate to the rollout of new assets, Reynolds said; the old regime, with heavy involvement by the Commerce Commission may have been suited to a sharing of the existing copper assets but not to a new rollout.

Committee member and former ICT Minister David Cunliffe asked Reynolds and, subsequently, TUANZ CEO Paul Brislen, whether they had ever heard of a ten-year forbearance period being allowed for the development of any of the many other fibre networks in place in other countries. Both said they had not, but Reynolds added the public-private partnership involved in the Ultra-Fast Broadband and Rural Broadband Initiative networks was unique in the world.

Cunliffe alluded pointedly to the possibility of a future Labour-led government dismantling the environment the present bill is trying to set up. Reynolds should weigh up carefully the consequences for certainty among investors and Telecom shareholders of having a rushed process now followed by a reversal “this year or in three years’ time” against having a better agreed, more deliberated and bipartisan agreement with a chance of surviving a change of government.

A process of “readdressing” the whole question would “terrify” investors, Reynolds acknowledged. “You know me well enough to know I wouldn’t kid about something so serious,” said Cunliffe.

The call for more deliberation resonated with a committee hearing having difficulty sticking to its schedule of ten minutes per speaker including questions. Reynolds spoke for more than 12 minutes, repeatedly pleading “let me finish” and questions went on until nearly the 40-minute mark.

The definition of equivalence between use of the fibre capacity by Telecom and its rivals if it set up the network was also energetically discussed. Cunliffe pointed out that the Bill does not enforce strict equivalence of inputs (EoI). Reynolds argued that the way Chorus 2, the new independent operator of the network under a proposed demerger, would be as good as EoI.

Would Reynolds then object to having EoI written into the bill, Cunliffe asked.

Reynolds, joined by Chorus head Mark Ratcliffe, who is currently Telecom’s lead executive on the UFB, protested again that treatment would be equal under either plan.

TUANZ CEO Paul Brislen told the committee his members oppose the 10-year “regulatory holiday”. Supervision by the Commerce Commission had allowed competitors to “really get stuck in” and create a thriving multi-supplier market. The current text of the Bill risks creating “one net to rule them all”, with the result that those who had been competing successfully over the copper network and stimulating the deployment of, for example VDSL technology, will be left with “stranded assets”.

You only had to look 10 years back to a world without Facebook, Twitter or even widespread use of Google to realise the speed of change, Brislen says. “So quite how you come up with a price point for the next decade ahead of time is quite beyond me.”

Woosh chairman Rod Inglis used the opportunity to disparage the role of Vodafone’s 3G technology in the Rural Broadband Initiative. “We all know the vagaries of 3G; yet Vodafone effectively gets paid by the government to extend its routes [using that technology] and shut out competition.”

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Tags sopTelecommunications Amendment BillVodafonetelecom

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