Telecom bumps up line rental and wiring maintenance fees

Price hike could swell Telecom's coffers by a further $40 million a year

New Zealanders will pay more for their telephone lines in March, when Telecom ups the line rental by 5.9% or $2.35 including GST a month.

While Telecom is permitted under the Telecommunications Service Obligation agreement with the government to increase the line rental annually by no more than the Consumer Price Index (CPI), it didn't do so last year. According to Telecom's public affairs and government relations manager John Goulter, the 5.9% increase is in line with the CPI over the two years since the last time the telco upped the line rental.

Telecom is also increasing the optional wiring maintenance fee by 12.9%, taking it to $2.53 including GST a month. According to Goulter, the increase for the wiring maintenance is a reflection on the costs involved. Likewise, Telecom's head of consumer marketing Victoria Crone blames rising prices in general for the line rental hike.

In areas where Telecom faces last-mile competition such as Wellington and parts of Christchurch, the line rental is also increased by 5.9%. However, customers there still pay less than other New Zealanders, with the Telecom HomeLine rental costing $34.80 per month as of March. Elsewhere, the monthly cost from March will be $42.20.

Even though the line rental is going up, Crone states that the overall cost of telecommunications has fallen. She doesn't provide any figures, but says national toll calls cost 15% less now than three years ago and international calls 30% less. Goulter agrees that the falling calling costs are due to "a very competitive market" and "tighter international agreements [between telcos]".

Ernie Newman, chief executive of the Telecommunications Users Association of New Zealand (TUANZ) says the increase shows the value of competition. Where there is competition, such as for toll calls, prices have fallen rapidly, Newman says. In contrast residential line rentals, on which Telecom has a monopoly, prices are increasing by around 6% Newman says. "Local line rental is far higher here than in most jurisdictions," he claims.

Newman points out that Telecom offers precisly the same service in Auckland and other parts of the country to customers in Wellington and Christchurch, but because of competition from TelstraClear, it charges $7 to $8 less a month there. This, Newman says, illustrates the value consumers get from competition. He says the price difference adds weight to the argument that Telecom's residential lines business should be opened up to competition in the same way just about every other developed country has done.

The increase takes the cost of having a telephone line with Telecom to $417.60 a year for Wellingtonians and Christchurch customers; others will pay $506.40 a year. With the increase in the optional wire maintenance fee, the cost is between $447.96 and $536.76 a year. This works out as either $1.23 or $1.47 a day including GST for Telecom's 1.4 million residential customers, depending on location.

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