Minister declines Telecom’s Separation Plan
29 February 2008 Media Statement
Minister declines Telecom’s Amended Separation Plan
Communications and Information Technology Minister David Cunliffe has today notified Telecom NZ that he will not approve their Amended Separation Plan.
“I am declining to approve the Amended Plan that I received from Telecom on 19 December 2007. In accordance with Section 69K of the Telecommunications Act, I have issued Telecom with a Notice of Requirements of further changes needed to their undertakings to finalise the operational separation process,” said Mr Cunliffe.
“On 24 December I called for public submissions on the Amended Plan. The submissions raised some significant issues which I gave careful consideration to before making my final decision to reject the undertakings.
“The feedback from submitters has been instrumental in identifying the need for greater clarity to ensure that Telecom’s operational separation will be effective and enduring.
“In general terms, Telecom’s revised undertakings come close to meeting my Amending Determination. However, there are a few areas where clarification of the undertakings is still required.
“In particular, I have asked Telecom to provide a clear upper limit on group-based incentives. This is to ensure that Wholesale management is encouraged by those incentives to treat all its customers (including Retail) equally. I want this to be consistent with robust operational separation.
“Other key changes requested include greater clarity around IP interconnection, as well as a range of other technical and definitional matters.
“My thanks go to Telecom Chief Executive Paul Reynolds and his team for their ongoing cooperation in the separation process. I am confident that we are collectively working towards a separation plan that will provide the best overall outcome for New Zealanders.”
Telecom has until 5.00pm, 25 March 2008 to revise its separation plan.
To view the notice of requirements and for information about the operational separation process see www.med.govt.nz/telecommunications/operational-separation.
Questions and Answers
1. Why is the government imposing operational separation on Telecom?
Operational
separation has been required by Parliament. The
Telecommunications Act 2001 sets out the purposes of
operational separation:
- to promote competition in
telecommunications markets for the long-term benefits of
end-users of telecommunication services in New Zealand; and
- to require transparency, non-discrimination, and
equivalence of supply in relation to certain
telecommunications services; and
- to facilitate
efficient investment in telecommunications infrastructure
and services.
Separation will increase the transparency of Telecom's business operations, and remove or limit the incentives and ability of Telecom to engage in discriminatory behaviours that lessen, damage or exclude competition in downstream markets.
2. What is the statutory process for the operational separation of Telecom?
Part 2A of the Telecommunications Act 2001 sets out the process for the Minister of Communications to finalise legally enforceable undertakings by Telecom in a "separation plan".
- Minister issues determination of
requirements for Telecom's separation:
The first phase
of the legislative process provides for the Minister to
issue a determination of further requirements additional to
those in the Act, with which Telecom's operational
separation plan must comply. The Minister's release of his
determination triggers the statutory process.
-
Preparation of a draft separation plan:
Once the
Minister has issued his determination, Telecom has 20
working days to prepare, in consultation with the Minister,
a draft separation plan that meets the requirements in the
Act and the Minister's determination.
- Public
consultation on the draft separation plan:
Once
received, the Minister must seek public comments on the
draft separation plan for 20 working days. Telecom will be
provided with all written comments received as part of the
public comments of the plan.
- Amendment of separation
plan:
Telecom must, in consultation with the Minister,
amend the separation plan in light of public comments, and
submit the amended separation plan within 15 working days
from the end of the consultation period. The revised
separation plan will also include a summary of the
amendments arising from public comments.
- Approve or
decline amended separation plan: [completed on 29 February
2008]
The Minister must either approve or decline to
approve the amended separation plan.
- Revision of
separation plan:
If the Minister declines to approve the
amended separation plan, he must indicate the parts of the
separation plan that require amendment. Telecom can be
directed to submit a further amended separation plan within
15 working days.
- Approve or amend revised separation
plan:
As soon as practicable after receiving the amended
separation plan, the Minister must then either approve the
revised separation plan or make any amendments and then
approve the amended plan.
3. What are the requirements on Telecom based on?
The determination of requirements is based on the Telecommunications Act's requirements and informed by:
- the model adopted in the United Kingdom
for British Telecom (BT), which was identified by Cabinet as
a useful basis for a robust operational separation.
Subsequently there was extensive consultation with BT,
OfCom, UK DTI and the EU Commission as well as broader
international benchmarking.
- the government's
consultation with the industry, other stakeholders and
Telecom itself throughout the operational separation
process. The government's model was well-received by
industry and other stakeholders. While the determination is
the Minister's, Telecom has been consulted, including at CEO
level. These discussions have been constructive and Telecom
has indicated that it is fully committed to implementing the
model for operational separation contained in the Act and
the determination.
4. What is the timetable for the completion and implementation of Telecom's Separation Plan?
- September 2007: Minister issued his determination of
further requirements and initiated legislative process for
the operational separation of Telecom.
- December 2007:
Telecom submitted its amended separation plan for the
Minister's approval.
- February 2008: Minister asks
Telecom to revise its separation plan within 15 working days
(by 25 March 2008).
- March 2008: Minister
accepts/rejects revised separation plan.
- 31 March 2008
(tbc): "Separation Day" – on which undertakings become
legally enforceable, IOG (Independent Oversight Group)
established, and Telecom to have established stand-alone ANS
unit and realigned wholesale services.
- 30 Jun 2008:
Remaining organisational implementation requirements
completed by Telecom.
- As soon as possible Telecom
migrates to self-consumption of LLU and UBA products and
prices
- December 2009: Business-to-business gateways
supporting equivalent business transactions to be completed
by Telecom. All re-sale services meeting re-sale equivalence
standard.
- By 2011: All LLU and UBA services fully EOI
(Equivalence of Inputs) compliant.
5. Is there any change to the timetable for operational separation?
I am committed to a high quality operational separation as quickly as practicable. While Telecom has 15 working days (until 5.00pm, 25 March 2008) to resubmit its separation plan, my expectation is that Telecom should be able to respond relatively quickly, and within this time, as the changes I have requested are not changes of policy but mainly points of clarification and interpretation. I will then still require some time to give the new separation plan serious consideration but I am hopeful that if Telecom can respond relatively quickly we may still be able to meet the 31 March 2008 Separation Day date.
The long term timetable for implementation of Telecom’s Separation Plan, once completed, remains unchanged.
ENDS