12.30 PM, 12 September 2013

Broad Coalition Says No To $600 Million Internet Tax

A coalition of Kiwi companies, industry associations and consumer advocate groups has today said no to government proposals to introduce what economists Covec say is a new tax of at least $600 million on Kiwi broadband customers.

In a discussion document issued last month, Communications & IT Minister Amy Adams proposed transferring decisions for the price of existing internet connections from the independent Commerce Commission to politicians in the Cabinet – and to charge users of the existing copper technology the same as those with access to the faster fibre technology.

According to a conservative analysis by Covec, the effect of the policy would be to transfer around $600 million from firms and households to one company, Chorus, which reported an after-tax profit of $171 million last year and increased the dividends paid to its shareholders.

The company’s share-price rose immediately after Ms Adams issued her discussion document on 7 August.

Firms and households would pay $600 million more than recommended by the Commerce Commission for existing internet services, even though more than 70% of households will not be using the new fibre network in 2020 – and 25% of households will never have access to it.

The Coalition for Fair Internet Pricing was founded by Consumer NZ, InternetNZ, and the Telecommunication Users Association of New Zealand (TUANZ) and is supported by CallPlus and Slingshot, the Federation of Maori Authorities, Greypower, Hautaki Trust, KiwiBlog, KLR Holdings, National Urban Maori Authorities, New Zealand Union of Students’ Associations, Orcon, Rural Women, Te Huarahi Tika Trust and the Unite Union.

A number of other organisations are strongly supportive of the coalition’s aims, including leading telecommunications companies and business groups, but have come under political pressure in recent days not to be part of today’s campaign launch.

The spokeswoman, Sue Chetwin, the Chief Executive of Consumer NZ, said the coalition was making two simple points:

“First, it is wrong for consumers to be forced to pay the same amount for older technology as for new technology. It’s like the Government saying people should pay the same for dial-up as for broadband, when broadband isn’t even available to them.

“Second, it is wrong for politicians around a Cabinet table to set prices for monopoly services rather than an independent body like the Commerce Commission. We haven’t seen that sort of thing since the 1970s and we are worried that is an attempt to tax consumers to subsidise Chorus.

“We call upon Ms Adams to indicate that she plans to reconsider her proposal.”

Ms Chetwin made clear that all members of the coalition support Ultra-Fast Broadbrand.

“However, under this funding proposal, there would be only one winner: shareholders of an already profitable monopoly. The losers would be every household, every small business, every big business, every farmer, every school and every student with broadband.”

Ms Chetwin said the new coalition would focus this week on completing submissions to Ms Adams’ consultation process and then running a comprehensive public campaign against the proposals.

For more information:
• Media Q&A
• Speech by Sue Chetwin
• Telecommunications Act Review: Economic Issues

ENDS

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