Telco commissioner slashes TSO cost

Telecom's accountants are sure to be unhappy at a telco commissioner determination that puts the cost of the kiwi share at one-fifth the amount originally claimed by the telco.

The telecommunications commissioner has released his draft determination on the cost of maintaining the telecommunications share obligation (TSO) and it is sure to upset Telecom’s accountants.

The commission’s TSO (formerly the kiwi share) figure for the period December 20, 2001 to June 30, 2002 is $38.84 million. Telecom had originally claimed the TSO cost for that period would run to $226.5 million, although it halved the amount after the commissioner asked it to re-work its figures.

Most of the reduction was due to re-working the cost of raising capital (known as the “weighted average cost of capital” (WACC), which Telecom claims would be around 11%. The draft determination puts that figure at 6%.

The Telecommunications Users Association (TUANZ) likes the commissioner’s number, saying the fact that it’s a fifth of Telecom’s original figure will be a relief to other carriers.

“It will give the rest of the industry a major boost and ultimately have a very positive impact on users,” says TUANZ chief Ernie Newman.

The cost of the TSO will be shared among eight of the largest providers in the country, but won’t reach as far as those ISPs that only sell internet access. The eight are TelstraClear, Vodafone, Compass Communications, CallPlus, WorldxChange, Teamtalk, The Internet Group (“ihug”) and Global One Communications (now merged with Equant).

The commission has also determined that only 4% of New Zealand’s phone users, roughly 51,800 phone lines, can be classified as “non-commercially viable customers” – the TSO costs can only be attributed to these users rather than to the entire local loop.

Telecom’s general manager for government and industry relations, Bruce Parkes, told Computerworld Online that undervaluing the TSO could “strangle” Telecom’s investment in the local loop.

But TUANZ’s Newman says Telecom’s TSO figures “always seemed incredible” and, in light of the commission’s conclusions, “now look utterly outrageous”.

“Regrettably, these Telecom estimates have had quite an intimidating effect on smaller carriers who for the past 18 months have been carrying a contingent liability to pay a contribution of unknown scale. Some have put investment plans on hold while the costing is resolved. They will certainly be celebrating today and will have new heart in driving forward to provide users with more choice and value."

The commissioner’s ruling, which runs to 181 pages, will now be open to submissions from interested parties before a conference is held in mid-August, followed by the release of a final determination.

Draft determination—who’ll pay what:

Telecom $31,131,873.80

Vodafone $3,859,564.16

TelstraClear $3,411,672.56

CallPlus $191,286.61

WorldxChange $166,859.61

Ihug $38,387.35

Teamtalk $18,821.13

Compass $17,624.27

Equant $3,910.50

Total $38,840,000.00

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