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Commission publishes report on pricing principle

Telecommunications Act: Commission publishes report on pricing principle

The Commerce Commission has today published a draft report proposing an amendment to the formula under the Telecommunications Act for setting initial prices for bundled service offerings.

On 27 February 2003, the Commission announced it would investigate this issue following a request from the Minister of Communications, Hon Paul Swain, on 30 January 2003.

As currently drafted, the initial pricing principle (IPP) for bundles of retail services offered by means of Telecom's fixed telecommunications network applies a double discount to any bundle that includes a price-capped service.

Manager of the Commission's Network Access Group, Osmond Borthwick, said that in the Commission's view, applying a double discount to any bundle that includes a price-capped service is inconsistent with the treatment of other designated services elsewhere in the Act.

"The result of applying a higher level of discount when a bundle includes a price-capped service compared with other designated services may risk damaging economic efficiency, which would be contrary to the purpose of the Telecommunications Act."

In the draft report, the Commission proposes that the IPP is amended to apply a single discount of 2% to price-capped services within a bundle, consistent with the treatment of price-capped services elsewhere in the Act.

The Commission invites interested parties to make written submissions on the draft report by 29 May 2003. The draft report can be downloaded from the Commission's website < > under Telecommunications Regulation/Telecommunications Investigations. After considering all the submissions, the Commission will prepare a final report for the Minister of Communications.

The Commission has given notice of the publication of the draft report in today's Gazette.

Submission details The closing date for submissions, together with electronic versions, is 29 May 2003.

Electronic versions should be e-mailed to These will be published on the Commission's website.

Hard copies of the submissions should be posted to:

Initial Pricing Principle Draft Report Enquiries: 64 (0)4 924 3686 Network Access Group Fax: 64 (0)4 924 3700 Commerce Commission PO Box 2351 Wellington Background The service "bundle of retail services offered by means of Telecom's fixed telecommunications network" is a designated service under the Telecommunications Act 2001. The Commission's procedure in making a recommendation to the Minister of Communications is governed by Part 1 of Schedule 3 of the Act in this case. Once the Commission has given public notice of the commencement of the investigation, clause 2 of Part 1 of Schedule 3 requires:

2 Draft report (1) After public notice of the investigation has been given, the Commission must--- (a) prepare a draft report; and (b) give public notice of the draft report; and (c) include in the public notice--- (i) the closing date for submissions, which must not be later than 20 working days after the date of giving public notice; and (ii) the date of any public hearing to be held under clause 3. (2) The draft report must include the detail of the proposed alteration.

The Commission will not be holding a public hearing in relation to the draft report. In addition, the Commission does not intend to hold a conference.

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