TSO overstays its welcome

We look forward to the eventual demise of the Telecommunications Service Obligation

Thank the gods the Telecommunications Service Obligation only has a couple of years left to live. It really is an embarrassment in this day and age.

Where else would you find Vodafone, a mobile phone operator, having to pay to maintain the fixed line business of its biggest competitor, Telecom?

The TSO, for those that have deliberately forgotten, is the successor to the old Kiwi Share Obligation — the KSO — which forced Telecom to give all New Zealanders free local calls. When the Government introduced the Telecommunications Act in 2001, it sat down quietly with Telecom and renegotiated the Kiwi Share on behalf of us all.

Let's put aside for the moment the suggestion that when Telecom was originally sold the asking price was discounted to account for the Kiwi Share and that, technically, we've already paid for it up front. There seems to be some debate about whether that was the case or not, so that's another story entirely.

The TSO is a little more complicated than the KSO because the advent of the internet changed the rules somewhat. Instead of free local calls, we are guaranteed free local voice calls and access to the internet at very low speeds. Dialup speeds, in fact: 14.4kbit/s and 9.6kbit/s, depending on your location.

Someone was asleep at the wheel on that one — those speeds are simply awful and could be delivered via cellphone these days (a cheap old cellphone at that).

The flipside of the TSO is that each company that interconnects with Telecom must pay its share of the cost involved in keeping "commercially non-viable customers" on the books.

Let us also put aside the question whether there are any commercially non-viable customers in New Zealand when we pay $40 a month for line rental plus extra on top for toll calls, for dialup access and broadband access.

The Telecommunications Commission has decided to interpret "interconnected with" as "has an interconnection agreement with", which I think is subtly different and quite wrong. It means that instead of the entire industry paying its share, which would be broadly fair and equitable, only a select few who have end-to-end agreements with Telecom are made to pay. That short list includes Vodafone which could run its business entirely without Telecom's fixed lines, but excludes Orcon, Ihug, Iconz, Quicksilver and all the other ISPs that could not.

To add insult to injury, Vodafone is required to pay the lion's share of the TSO cost, around $13 million, because it makes a lot of money. Not from interconnecting with the fixed-line network, but from its own business. This also strikes me as a cruel and unusual punishment.

Telecom's argument is that Vodafone makes use of commercially non-viable customers and that's a good point, but I don't think it could be said that Vodafone does that more often than TelstraClear, Compass, CallPlus or any of the other TSO payees.

However, the real problem lies with the way the Commission has decided how much it costs to maintain these non-viable customers. The reports are full of descriptions of the cost of digging trenches, maintaining exchanges and running lines to customer premises. Given the incredibly low levels of service guaranteed by the TSO, why doesn't the Commission simply say "provision these services via cellphone" and work out its sums that way? Why this "scorched node" approach to network costs? Nobody has explained this yet; the only answer I've received was it's the way it's done elsewhere.

Thankfully this is all about to become a moot point. Telecom is rolling out its "next generation network", an all-IP affair that the Commission has already said is out of bounds for its wholesale market rules. If that's the case then either it should be excluded from the TSO farce in future or the TSO costs should be reduced to almost zero given the incredible efficiencies of running an all-IP network.

Either way, I, for one, won't be sorry to see the back of it.

Brislen is a Computerworld reporter. Contact him at paul_brislen@computerworld.co.nz

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