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Telecom’s Y2K problem…Fair competition

A Y2K problem for Telecom...the Alliance wants Telecom regulated to make it compete fairly and bring down telephone costs for households and businesses.

The Alliance policies on commerce, telecommunications and information technology were released at parliament today by Alliance leader Jim Anderton and commerce and telecommunications spokesperson Laila Harré.

The Alliance wants to strengthen the Commerce Act by giving the Commerce Commission the power to prevent anti-competitive behaviour. At the moment, it can only act against anti-competitive behaviour if it can prove a motive on the part of the person with a dominant position to eliminate or reduce competition.

In other words, it is necessary to show not just that a person has used a dominant position to diminish or avoid competition, but also that that was their purpose in taking the action complained of.

Network monopolies such as Telecom will be subject to a strict information disclosure requirement, where they will have to disclose the costs of operating the network. That will make it easier to separate out the profits being made from the network monopoly.

'Repeated surveys have shown that New Zealanders are paying far too much for our phones because Telecom doesn't face true competition on its network business. It's up to a new government to intervene on behalf of consumers and businesses to bring prices down,' Laila Harré said.

'For example, in Wellington where Telecom faces competition on its local network from Saturn, it has reduced line charges to match Saturn's price. But it has not reduced prices elsewhere. That means either that Telecom is charging too much for line rentals around most of New Zealand because it doesn't have competition, or it means that Telecom is predatory pricing in Wellington.

'The hands-off, free market approach has not worked. It has allowed Telecom to take billions of dollars out of New Zealand for its foreign owners, but it hasn't delivered competition.

'The Alliance recognises the need to regulate Telecom to open it up to competition and bring phone prices down. It should be a priority for a new government next year,' Laila Harré said.

A study by a consortium of experts led by Jeff Todd last year showed that Telecom could be making monopoly profits of $382 million a year. This equates to excess charges of $103 a year for residential customers, $10,140 for a medium-sized business and $253,000 for a major corporate.

The Alliance has estimated that if Telecom reduced its charges by these amounts, up to 0.6% could be wiped off CPI inflation. The Reserve Bank would not have increased interest rates last week.

In March this year Australia's Productivity Commission compared phone prices in nine similar OECD countries – New Zealand, Australia, Finland, Sweden, USA, France, UK, Canada and Japan.

The independent, comprehensive report found New Zealand's charges for business phones are the most expensive. New Zealand had the highest prices for residential customer access (line charges); international calls and calls to mobile phones. The total service price for residential phones is the second worse, behind only Japan.

Telecom submitted its own response to the Australian Productivity Commission. The rejected Commission Telecom's argument as being essentially self-serving.

Visit http://www.alliance.org.nz for more information about the Alliance

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