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Accounting Separation needs to be fast-tracked

Accounting Separation needs to be fast-tracked and strengthened - InternetNZ

Media Release
23 July 2008

InternetNZ (the Internet Society of New Zealand Inc) has called for the Accounting Separation regime for Telecom to be strengthened and fast-tracked, in its submission to the Commerce Commission. The submission was on the “Draft Principles and Regulatory Reporting Requirements for the Accounting Separation of Telecom”.

Accounting separation requires Telecom to transparently report on detailed aspects of its operations and behaviour. It will provide the information needed to allow the Commerce Commission and the industry generally to ensure Telecom is upholding the letter and spirit of the operational separation regime, and its other commitments.

InternetNZ strongly supports the Commission’s approach. Executive Director, Keith Davidson, welcomes the indication by the Commission that it will look later at additional reporting by Telecom than initially proposed. However, “It would be better if Telecom were required to implement more robust and comprehensive reporting more rapidly.”

“Robust Accounting Separation is crucial to the success of the Operational Separation of Telecom.”

InternetNZ submits there is no need for the proposed transition year as there is plenty of experience to build on, both from the electricity industry in New Zealand and from the accounting separation of British Telecom in an operational separation context.

The actual accounting approach as proposed by the Commission also needs to be reconsidered.

“The focus on historical cost reporting is recognised internationally as unsuitable for achieving regulatory outcomes. Current cost accounting should be introduced quickly, including for the current year. This will also help parties to monitor whether the wholesale prices that Telecom is charging are reasonable,” says Davidson.

Furthermore, Telecom should report on Commerce Act related information such as market impacts caused by the rapid rise in the bundling of services (such as triple and quad play offerings).

Reporting should go beyond historical information to include forecasts and plans including in relation to investments, just as in the electricity industry. Of particular concern here is the key area of Telecom’s NGN investment.

InternetNZ has also submitted that Telecom’s gen-i unit should be included in disclosure obligations, as it is the business equivalent of Telecom Retail. “Gaining transparency requires the picture to include the full retail operation.”

InternetNZ’s full submission can be downloaded here:


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