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Commerce Commission releases draft TSO costings

Telecommunications Act: Commerce Commission releases draft TSO cost calculation

The Commerce Commission has released its draft determination on the calculation of Telecom New Zealand Limited's net cost of complying with its telecommunication service obligations (TSO) for the period 1 July 2002 to 30 June 2003 (the end of Telecom's financial year). The Commission has calculated the cost for that period to be $62.6 million.

The cost will be apportioned between Telecom, TelstraClear Limited, WorldxChange Communications Limited, Vodafone New Zealand Limited, CallPlus Limited, Compass Communications Limited, Teamtalk Limited, The Internet Group Limited (ihug) and Equant New Zealand Limited, in proportion to their net revenues.

Telecommunications Commissioner Douglas Webb emphasised this is a draft determination, and interested parties are invited to make submissions on the determination. The closing date for submissions is Friday 30 July 2004. A conference on the draft determination will be held in mid-August, with the final determination expected to be issued as soon as possible after the conference.

The Commission used the same methodology to calculate the net TSO cost for 2002/03 as was used to produce the final TSO figure for 2001/02. The major input that has changed is the weighted average cost of capital, which has increased from 7.1 percent to 7.4 percent. However, this has not increased the overall cost of the TSO as the cost of capital equipment has reduced in line with the industry price trends.

The Commission used two models to calculate the net cost:

* Hybrid Cost Proxy Model (HCPM) developed by the US Federal Communications Commission and modified by the Commission to calculate the incremental cost of providing the service to commercially non-viable customers.

* CostPro New Zealand model used to calculate the incremental switching, transport and concentration costs of servicing commercially non-viable customers.

A copy of the Commission's draft determination is available on the website, , select Telecommunications Regulation.

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