No surprises in TSO wrangle says analyst

The stoush between Telecom and the Commerce Commission over costs for the telecommunication service obligation (TSO) is hardly a surprise, says one telco analyst.

The stoush between Telecom and the Commerce Commission over costs for the telecommunication service obligation (TSO) is hardly a surprise, says one telco analyst.

Jeremy Simpson, Auckland-based analyst with investment firm Forsyth Barr says the tussle between the incumbent, Telecom, and new players is always going to see Telecom calling for higher fees while the new players call for lower ones.

"It's totally expected that the other players would think that Telecom was overestimating it. It's in Telecom's interest to overestimate and the other guys' interests to underestimate it."

Telecom is required by the Telecommunications Act to provide the commissioner with "an annual assessment of compliance with the service quality measures defined in the TSO instrument" according to the commissioner's office. Telecom has done so, claiming the TSO costs the company $226.5 million over six months.

However, the Commerce Commission, which houses the telco commissioner, has asked Telecom to reassess the figure based on new parameters set by the commission. Telecom has until October 18 to comply.

"I find it interesting that the commissioner has made the comment that the calculation wasn't done in accordance with their criteria."

The TSO replaced the Kiwi Share agreement signed when Telecom was first sold off in the early 1990s. The Kiwi Share required Telecom provide free local calls, ensured that rural users weren't charged more than urban and that the cost of line rental didn't increase by more than the standard of living each year.

Telecom has claimed that it has created "the most accurate and detailed model in the world" and that it worked closely with PricewaterhouseCoopers in London on the model which was then audited by KPMG. The commissioner has given Telecom until October 18 to comply with its request for a new set of figures based on its parameters.

"I understand that the commissioner will be working on his own model as well so it will be interesting to see what happens in October."

The figures will be made public in December and a ruling is expected to be announced by early 2003.

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