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UPDATE: Gov't announces final details of Telco Act reform

Thursday 01 June 2017 01:19 PM

UPDATE: Government announces final details of Telecommunications Act reform

(Recasts lede, adds comment from Vocus CEO starting in sixth paragraph).

By Rebecca Howard

June 1 (BusinessDesk) - Telcos have responded positively to news the government announced the final details of the reform package for the Telecommunications Act that refines regulatory settings that will apply to fibre and copper fixed line services from 2020 although some concerns have been raised.

The aim is to deregulate the copper network where it competes with fibre from 2020, expected to cover three-quarters of the population by then. The government launched a review of the 15-year-old Act in 2015 to gauge the crossover with broadcasting and to have a look at the way network service pricing was regulated after Chorus underestimated the extent it would have to cut wholesale prices when it was carved out of Telecom Corp, now Spark. In February it announced a fixed-line regulatory package following consultation and the final details include some changes.

Among other things wholesale prices for copper services in non-ultra fast broadband (UFB) areas will be inflation adjusted from 2020, the ministry of business, employment and innovation said on its website. A small change will be made to the valuation method for older assets, which will simplify the initial valuation of the assets of regulated suppliers. The Commerce Commission will not be required to decide whether investments made by UFB providers before 2020 were efficient. It will clarify that the price-capped fibre broadband anchor product is intended to be an entry-level product, not the most popular product and the direct fibre access service (a business-grade fibre product) will also be price-capped.

To complement the fixed line regulatory reform, the government will streamline regulatory processes for mobile regulation. The government has also decided to augment consumer safeguards and to provide more regulatory oversight of retail quality standards and dispute resolution processes, MBIE said.

Under the new system, UFB providers will have to disclose information about their revenues and costs publicly, Telecommunications network operator Chorus will also be subject to a revenue cap from 2020 and local fibre companies will face competition from copper and cable, but can be regulated if problems arise.

Vocus Group chief executive New Zealand Mark Callander said it was positive the government had given the final details but highlighted some areas for concern. Among other things, he said the price-capped anchor product should be faster.

"It’s disappointing to see that the regulated fibre anchor product hasn’t been increased from 100Mbps to 1Gbps," he said. "Instead they’ve said that ‘the price capped fibre broadband anchor product is intended to be an entry-level product; not the most popular product’." He said, however, customers are demanding faster speeds, with around 50 percent of Orcon's sales for gigabit fibre "and we expect demand for these services to increase," he said.

He said this means that most New Zealanders will not be on a fibre service that has its price regulated. Companies will be free to decide whether to offer faster services and charge what they want as long as they don't exceed a revenue cap set by the commission. "That's open to gaming by the monopoly local fibre company," he said.

Telecommunications network operator Chorus said it "welcomes the next step" in the process.

"The right regulatory settings for broadband connectivity, which sensibly support efficient investment without costly duplication of utility infrastructure, will ultimately deliver better quality and greater affordability for all Kiwis," said Chorus executive Vanessa Oakley in a release to the stock exchange. A bill is now expected to be introduced to parliament in the second half of the year, she said.

"There is a need to strike a balance between providing investors with a fair return on the significant network investments they've made with the broadband innovation and the quality consumers clearly want," said Oakley.


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