TSO figure upsets all

The Telecommunication Commissioner's latest ruling on the Telecommunications Share Obligation (TSO) has been met by howls of anguish from all sides.

The Telecommunication Commissioner's latest ruling on the Telecommunications Share Obligation (TSO) has been met by howls of anguish from all sides.

The commissioner has calculated the net cost to Telecom of providing service to the so-called commercially non-viable customers (CNVC) for the period 20 December 2001 to 30 June 2002.

The final amount is $34.72 million, which becomes an annual total of $65.67 million. Telecom had originally set the figure at around $450 million a year, but the commission rejected Telecom's model and instead used a different process to reach the final amount.

Telecom has criticised the final figure, which will be shared between those network operators that provide retail services. These include TelstraClear, WorldxChange Communications, Vodafone New Zealand, CallPlus, Compass Communications, Teamtalk, Ihug and Global One Communications which will each pay a proportional amount.

Telecom's general manager for government relations, Bruce Parkes, says Telecom will have to grin and bear the result.

"We don't believe that this assessment of the TSO is anything like a realistic measure of the true costs. However, Telecom's stance on this matter has been to put up the best case we can and then get on with the job of focusing on customers".

Telecom vigorously lobbied the commissioner's office after the draft decision was released some months ago and the commissioner has agreed to raise the "weighted average cost of capital" (WACC).

Commissioner Douglas Webb says the move was made because the adoption of wireless technology would have offset the cost of retaining the CNVCs.

“Though the increased return on capital allowed to Telecom would have increased the net cost, this change was more than offset by the adoption of a wireless technology cap on the costs of remote customers, who were previously serviced by fibre-optic systems, and by other adjustments in the calculation process.”

TelstraClear takes the opposite view, claiming Telecom is being paid "a generous return for low risk", according to chief executive Rosemary Howard.

"Telecom’s line rentals more than cover the cost of delivering service to homes. The New Zealand TSO is a barrier to choice because when we win new customers we’ll have to pay an increased share of a loss that doesn’t exist."

The Telecommunications Users Association (TUANZ) questions the entire TSO agreement, saying it is outdated and unnecessary, according to chief executive Ernie Newman.

"It is absolutely riddled with anomalies and inefficiencies – one of which is the huge resource being used to make this calculation and which could be used in the community interest far more productively."

Newman says the current model is far too complex and the idea that Telecom's competitors will have to pay Telecom more as they gain market share is ridiculous.

"It is an absurdity that carriers other than Telecom have to fork out a share of Telecom’s costs even though they could in many circumstances provide a similar or better service themselves without a need for a community subsidy. They should be allowed to compete to do so."

Australian telco analyst Paul Budde has also weighed in on the matter, saying a total rethink of the TSO is needed.

"I don't mind a high TSO if it was to be allocated to build new infrastructure in New Zealand, this should be combined with the Probe initiative. Such a TSO should be totally controlled by the government not by Telecom."

Budde suggests operating a separate fund, paid for by the TSO levy, to build and maintain the CNVC network.

"A fund might be established to maintain and upgrade regional and rural infrastructure. However, this should be similar to Probe and totally transparent and open for participation to all accredited infrastructure providers".

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