- Of Limited Value
- Of Limited Value
That's a pretty stinging rebuke when you consider it. Telecom claims it spent millions of dollars on its model for working out the cost of the Telecommunications Share Obligation (TSO) and got in PricewaterhouseCoopers from London to do the work and had produced "the most accurate and detailed model in the world". And the Telecommunications Commissioner's office says it's "of limited value". Ouch.
The TSO is the legacy of the early 1990s' sell-off of the country's telecommunications infrastructure. Originally called the Kiwi Share Obligation (KSO), it makes sure we always get free local calls, that rural users don't get charged more than urban and a couple of other provisos.
In today's market we have the internet, the commissioner and a whole regulatory regime, none of which existed when the KSO was drawn up. Telecom doesn't like the idea of having to deliver free local calls when most people use their phones in a completely different way to how they did back then. Now we stay online all day, every day, hogging resources and tying up lines and generally getting away with it for free. Clearly it rubs the wrong way.
The flipside of the TSO requirement is that now the other telcos get to pay a share of it. Ah, I hear you say, so that's what this is all about. Telecom's come up with some numbers in an attempt to get lots of money out of the others. That's it, pretty much, in a nutshell.
Telecom claimed that the cost of providing the TSO ran to a staggering half a billion dollars a year. After the commission said "no, do your sums again and this time show your workings", it came back with a number roughly half that.
Now the commission has said the entire model is invalid and won't be the basis for its final decision on the matter.
"[The] commission's preliminary view, to be tested through the consultative process, was that the Telecom model has a number of drawbacks and is of limited value to the commission in calculating net TSO costs," says the commission's manager of the network access group, Osmond Borthwick.
So what does this mean for Telecom? It can expect the income from the TSO proportioning to be a great deal less than it first mooted and probably a lot less than it would like. For the other telcos it means not having to pay Telecom tens of millions of dollars to gain access to the local loop. They'll still have to pay, and that's only right and proper, but presumably at a greatly reduced amount. That's nice, since the margins in the ISP world are so slim that I can't see the likes of Ihug being happy to stump up its share of half a billion dollars (and possibly going under) in a hurry.
The decision is yet to be finalised. The commission will work through various discussion rounds and come out with an answer later in the year.