Telco Commissioner rejects Telecom's TSO model

The Telecommunications Commissioner has rejected Telecom's accounting method for calculating its Telecommunications Share Obligation.

The Telecommunications Commissioner has released his preliminary analysis of Telecom's Telecommunications Share Obligation (TSO) model and has rejected Telecom's accounting method.

"[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, in a written statement.

In September last year, Telecom released figures that put the cost of providing for the TSO, which includes free local calls, at around $450 million a year. The commission rejected this figure (Telecom told to re-work TSO figure) and Telecom came back with a revised number (New TSO figure from Telecom could be half original estimate) that included a lesser amount for the cost of raising capital, bringing the new total to $210 million.

However, the commission has rejected Telecom's entire TSO accounting model, described by Telecom general manager government and industry relations, Bruce Parkes, as "the most accurate and detailed model in the world".

"The commission is using the Hybrid Cost Proxy Model (HCPM) model developed by the US Federal Communications Commission [FCC] to calculate the key parts of the incremental cost of serving commercially non-viable customers," says the commission's statement.

The commission is calling for discussion on the matter before its conference, to be held in Wellington on May 15 and 16. The commission will release a draft determination on TSO costs by the end of May.

TSO is important to other telcos as well as to Telecom as the commission will be apportioning costs of maintaining the TSO to each telco according to its market share.

The commission's analysis of Telecom's model plus documentation on the commission's own model, will shortly be available on the commission's site.

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