Commerce Commission about turn: Spark voice resale to stay regulated

The Commission released a draft report in September recommending that Spark’s three Resale Services be removed from Schedule 1 of the Telecommunications Act

The Commerce Commission has done a complete about face on its September draft recommendation that Spark’s resale voice services be deregulated after a 12 month transition period and in its final decision is recommending to the minister that it revisit the issue in two years time.

The Commission released a draft report in September recommending that Spark’s three Resale Services be removed from Schedule 1 of the Telecommunications Act 12 months after the Order in Council had been made.

It said: “having the Resale Services in Schedule 1 is not itself delivering competitive retail pricing or innovation in voice services. Competition has been established, is increasingly effective, and is no longer dependent on access to the Resale Services. Chorus, the local fibre companies and fixed wireless operators all have the infrastructure to offer alternative wholesale voice services to RSPs.”

In its final report, issued 22 December it says: “Our final view is that: there is likely to be little or no benefit from immediate removal of the Resale Services from Schedule 1; and any benefit is likely to be outweighed by the potential costs associated with any exercise of market power by Spark especially while RSPs are migrating customers to alternatives including fibre.”

The main reason for the Commission’s about face appears to be issues with resellers transitioning from Spark’s resale voice services to alternatives. As Computerworld reported on 20 December, most submissions to the draft report were broadly supportive of the Commission’s decision but wanted a longer transition period.Spark, however saw no reason for any transition period, saying it would be unlikely to add much in the way of certainty, bargaining power, or stability to the industry.

The final report said that maintaining regulation of the services would limit Spark's ability to take advantage of RSPs during a period in which RSPs are developing their capability to make greater use of other wholesale inputs.

In the Commission’s view Spark is still able to exercise considerable market power. It said: “If Spark were to cease supplying Resale Services to those RSPs who are unable to take advantage of wholesale alternatives, the RSPs would face the prospect of losing their retail end users to Spark. RSPs may also face considerable disruption from having to undertake an additional migration at a time when demand for fibre-based services is increasing.”

The Commission said it was not satisfied that the current commercial contracts would provide sufficient protection to RSPs, given the notice periods in the termination clauses of the contracts. “Given the concerns raised in submissions and discussed at the conference, the wholesale alternatives to the Resale Services may not be practically available to RSPs within such a timeframe.”

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