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InternetNZ submits on Telecommunications Bill

11 September 2006 Media Release

InternetNZ submits on Telecommunications Amendment Bill, seeks full operational separation of Telecom

InternetNZ (The Internet Society of New Zealand) has released its submission to the Finance and Expenditure Select Committee on the Telecommunications Amendment Bill. InternetNZ strongly supports the policy objectives of the legislation and makes significant further input around separation and competition law issues.

Separation:

InternetNZ believes the accounting separation regime proposed in the Amendment Bill is not sufficient. A strong operational separation plan is required. InternetNZ does not regard Telecom's operational separation plan as anything like the approach taken by British Telecom (BT), nor sufficient for New Zealand.

Telecom is not only seeking Select Committee endorsement of its operational separation plan but is also asking the Committee to release the company from threat of further separation. InternetNZ regards this as unacceptable.

Telecom maintains there are only minor differences between its proposal and the BT model. InternetNZ strongly disagrees. A separate division for the network business is the core component of the BT model, yet makes no appearance in the Telecom model.

Operational separation must involve the splitting out of the core network from other aspects of the business because, as identified by the UK regulator, that is where the main problem lies.

The only way to get a sufficiently strong operational separation plan is to have a legislative path to achieve this. The InternetNZ submission has an easy method for this to be included in the Bill. To add to this, InternetNZ seeks further investigation of structural separation as a medium to long term solution, noting that the ability of UK authorities to require structural separation without further legislation was an important incentive for British Telecom to agree to the constructive operational separation plan in the UK.

There are many questions raised by Telecom's push for its own operational separation plan:

* Why is Telecom not separating out its network division like British Telecom has with Openreach (as well as separating wholesale)? Why does it propose to only separate wholesale services?

* Why does Telecom (in a way that is only apparent from a very detailed reading of the” fine print” of its submissions) give the key “equivalence of inputs” commitment only as to 3 services (upsized UBS, Naked DSL and LLU). BT covers many other services at this level, to address the heart of the problem. This severe limit in Telecom's approach will just continue the same problems that the BT model solves).

* Why is Telecom's separate wholesale division reporting into its unseparated network division and not its CEO?

* Why does Telecom not preclude its wholesale staff from long-term Telecom Group performance incentives? Key to the BT solution is that Openreach staff are incentivised only by Openreach’s performance. Driving behaviour in this way is important in the BT model.

InternetNZ has provided a comparison of Telecom's operational separation plan with that of British Telecom in Appendix 2 of its submission.

Competition law:

InternetNZ is seeking for sector specific competition law to be introduced as has been the case in Australia. Across the Tasman the regulatory authority, the ACCC, can give a provider notice if it believes there is anti-competitive conduct.

The penalty regime encourages quick and voluntary action to comply regardless of the timings of the determination process.

InternetNZ is also seeking higher penalties, noting that in the UK these can be up to 10 per cent of relevant turnover (and in Australia they can be up to A$21M for the first 21 days of breach, and $3M per day after that).

InternetNZ presents its submission to the Finance and Expenditure Select Committee at 5.00pm on Wednesday 13 September, in the Parliamentary complex.

The InternetNZ submission is published at: www.internetnz.net.nz/pubs/submissions/2006/2006-09-11-select-committee

ENDS


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