TELECOM AND GOVERNMENT SIGN NEW KIWI SHARE AGREEMENT

General Manager, Government Relations Bruce Parkes said today Telecom was pleased to have completed the process of updating the Kiwi Share as one component of New Zealand¡¦s new framework for regulating telecommunications.

¡§With the updated Kiwi Share and passage through Parliament of the Telecommunications Act, we now have certainty in the regulatory environment after two years of review and debate,¡¨ Mr Parkes said.

The Telecom and the Government have updated the Kiwi Share Obligations (KSO) on the Company by signing a Telecommunications Service Obligations Deed which largely renews the KSO principles first established in 1990.

¡§We have agreed with the Government to extend the KSO so that it now includes dial up data services for residential customers as well as voice calling,¡¨ Mr Parkes said.

¡§In doing this, it has been important to define what those services are and what they are not. Certainly there are limits on what Telecom has agreed to provide within the local free calling option for local residential telephone service,¡¨ he said.

Key elements of the updated KSO are: „h The local free calling option will continue, with Telecom able to offer optional packages of service on a geographical or customer segment basis. „h Standard residential line rental will be not increase in real terms (after adjustment for inflation), provided profitability in Telecom¡¦ s fixed line business is not unreasonably impaired. Line rental may be raised in line with consumer price inflation. „h Line rental for rural customers will be no higher than standard residential line rental and local telephone service will be kept as widely available as it is in December 2001.

„h Dial up data services covers both standard facsimile calls or standard Internet calls, with the latter defined as calls made to Internet service providers in order to access Internet services of the kind generally available today. „h Telecom can specify that standard Internet calls must be dialled on 0867 or another number range. Internet calls that use other numbers may be charged for. „h At this stage, standard Internet calls exclude a range of data services from the local free calling option. These services include interactive television, voice over Internet protocol, video and online games services, and eftpos services and new services which depend on Internet capability not already in common use. „h Service standards for local telephone service will include minimum connect speeds of 9.6 kilobits per second (kps) and 14.4 kps for 99% and 95% of all residential lines respectively, with effect from December 2003. „h Other service standards require Telecom to limit switch downtime and the incidence of dropped calls, and to maintain the 111 emergency calling service at or above specified levels. „h There is provision for either Telecom or the Government to request a review of any aspect of the updated KSO.

Mr Parkes said the new agreement cemented in place a forward-looking framework confirming what Telecom would provide as part of free local calling while also setting limits to those obligations.

¡§In particular the agreement does not require Telecom to carry for free new types of Internet call traffic that might emerge based on new Internet capability,¡¨ he said. ¡§That¡¦s important given the explosive growth now occurring in dial up Internet calls. These account for around 70% of all residential local calls and, of course, we receive no additional revenue for that traffic.¡¨

¡§To develop the new communications services that will take New Zealand into the future, we need a regulatory framework that recognises the critical importance of commercial decision making and stimulates new investment,¡¨ Mr Parkes said.

The Telecommunications Service Obligations Deed for Local Residential Telephone Service is available on the Telecom website, see About Telecom/Telecom Group/Regulatory and Legal Matters http://www.telecom.co.nz/content/0,2502,200674-1553,00.html

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