Opinion: Getting real on mobile data (and regulatory holidays)

Regulatory holiday for UFB partners flies in the face of world best practice

Sometimes, it is the little anecdotes that come to mind to better illustrate a bigger story.

Through work I attended a conference in Brussels last December, being the annual regulatory policy conference of the European Competitive Telecommunications Association.

One of the more amusing presentations was by a member of the European Parliament from Sweden, Christian Engström, who related his view, based on Ericsson data, that the production cost of one gigabyte of mobile broadband was €1.

The average cost of roaming broadband in the EU, he said, was around €2600 per gigabyte.

His suggestion of a generous retail mark-up of 900 percent, with a regulated maximum price of €10/Gb for roaming data, was met with nervous laughter by the incumbents, but the room was full of nodding heads when he pointed out that a trip in the EU sees people paying more for their use of data than the cost of the travel itself.

Mobile data is under scrutiny locally this year too. Last year the New Zealand and Australian governments issued a paper seeking an informed discussion of why mobile roaming – voice, text and data – is so expensive across the Tasman. They were considering a joint approach to tackling the problem, if such was identified.

This is a good start. When you accidentally leave your data on and your smartphone usage costs more than the ticket to Sydney, you know there’s a market failure at play.

ICT Minister Steven Joyce and his counterpart in Australia Senator Stephen Conroy will be looking at the situation this year. I hope they agree there is a problem and that they tell their officials to sort it out.

The other impressive anecdote from that conference relevant to our local scene was a statement by the European Commission’s Bernd Langeheine, the director of electronic communications in what is the EU’s civil service.

You may be aware of a long fight in the 2000s between the European Commission and the German government over the regulation of Deutsche Telekom’s (DT) cabinet-based VDSL network.

The Germans were intent on giving a regulatory holiday, allegedly to incentivise the investment that DT was always intending to make.

The Commission was determined to stop what it saw as an erosion of the principles underpinning the EU’s telecommunications regulatory framework – which sets out a pro-consumer, market-friendly, legal framework that all EU member states are obliged to implement in their domestic law.

In that fight, the Commission won, and the German authorities lost. Langeheine was clear – “the debate on regulatory holidays is over,” he said, to applause from the conference audience.

The obvious link to be drawn in the New Zealand case is the decision of the Government to give a regulatory holiday to the pending investments in fibre being made through the Ultra Fast Broadband (UFB) initiative.

Whatever the origin of the suggestion, it flies in the face of world best practice. Instead of the experts at the Commerce Commission having oversight of price and non-price terms for fibre supply, the investment company at the heart of the UFB plan (and obliged to make a return on its investment) is given responsibility for controlling those issues via contracts.

A whole set of heroic but flawed assumptions underpin that call: that contract negotiators today have enough knowledge about the communications sector for the next 10 years to get it right; that the obvious conflict between being an investor and a regulator is able to be ignored; and that a regulatory holiday of this type is consistent with this country’s international trade obligations.

In this matter, New Zealand should be taking a leaf out of the European play book. Regulatory authorities have the time horizons, expertise and correct interests at heart to do a better job of protecting the public from emerging market problems than any other entity.

Jordan Carter is policy director for InternetNZ

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