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Commission seeks views on approach to new fibre regulation

Commission seeks views on approach to new fibre regulation

The Commerce Commission has today invited views on its proposed approach to implementing the new regulatory regime for New Zealand’s fibre broadband networks.

The Government’s Ultra-Fast Broadband Initiative aims to deliver social and economic gains from better access to public services and better business productivity.

In approving amendments to the Telecommunications Act on 7 November 2018, Parliament has established the statutory framework for the new fibre regime. The Commission’s job is to set a revenue cap and service quality standards for Chorus, and information disclosure rules for Chorus and the other fibre companies - all this at the time of ongoing rapid change in the sector.

“End user demand for data and services is growing, broadband technology is responding - or leading - and the competitive landscape is changing,” said Telecommunications Commissioner Dr Stephen Gale.

“As a result the rules we develop need to have the right mix of predictability and flexibility to allow industry to best manage these changes. Our aim is that the new regime provides confidence that fibre networks are operating efficiently and innovating to keep up with consumer demands for quality broadband services, at the same time making a competitive rate of return.”

The proposed regime for fibre networks is largely based on Part 4 of the Commerce Act, which applies to energy networks and airports. The Commission intends to draw on its experience in developing and implementing this utilities-style regulation to inform its approach to fibre networks.

“We will be working closely with stakeholders to develop this new regime. Our first paper focuses on explaining the framework and our proposed approach as well as key issues we have identified that will be developed further through the consultation process,” Dr Gale said.

The Commission will be holding a workshop for interested stakeholders in early December to discuss key issues in this paper. Submissions on the paper are due by 21 December 2018 and cross-submission by 25 January 2019.

For further information visit our website.

Background

The Government’s Ultra-Fast Broadband initiative originally aimed to provide fibre-to-the-premises to 75% of New Zealand’s population by 2020. The program was expanded twice in 2017, and now aims to achieve fibre-to-the-premises to 87% of the population (including 1% private fibre) by 2022. Rural areas of New Zealand are covered by the separate Rural Broadband Initiative. These new fibre networks will provide faster and more reliable voice and broadband internet services to end-users.

The Government’s Crown Infrastructure Partners has contracted with four companies through to 2020 to build these fibre networks: Chorus and three local fibre companies (LFCs) – Northpower Fibre, Ultrafast Fibre and Enable Networks.

The Telecommunications (New Regulatory Framework) Amendment Bill passed its third reading in Parliament on 7 November 2018. Once enacted, the new provisions will require us to develop and implement a new regulatory regime for these four fibre network providers. The regime is to apply from 2020, with the ability for the Minister to defer the implementation date until 2022 on our request.

Under this new regime, the Commission will set the maximum revenue that Chorus can earn from their customers and the minimum quality standards it must meet - this is referred to as price-quality regulation. Additionally, all four fibre network providers will be required to publicly disclose information on their performance, such as on their profitability, revenue, and capital expenditure. This is referred to as information disclosure regulation and is intended to shed a light on their performance for stakeholders and consumers.

The regime first requires the Commission to determine ‘input methodologies’. These will set out the rules, requirements and processes for how the price-quality and information disclosure regulation will apply to the fibre network providers. The input methodologies provide a stable and predictable regulatory regime for both regulated suppliers and consumers. This is turn builds confidence to invest in long-lived infrastructure for essential services to all New Zealanders.

This new regime is similar to how the Commission regulates energy networks and airports under Part 4 of the Commerce Act. This paper sets out the Commission’s proposed approach for developing the fibre input methodologies and its initial view on key issues.

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