The Commerce Commission has today recommended to Communications Minister Steven Joyce that a "significant" number of services that Telecom's Wholesale division provides to other telecommunications companies to be resold should no longer be subje
The Commerce Commission has today recommended to Communications Minister Steven Joyce that a "significant" number of services that Telecom's Wholesale division provides to other telecommunications companies to be resold should no longer be subject to the Telecommunications Act (2001).
The company's shares (NZX: TEL) were up two cents to $2.19 in early trading, continuing a bull that began when Telecom was announced the priority Crown Fibre bidder in 25 regions, including a solo run at Auckland and Wellington.
Not everyone was convinced of its market impact, however (read: Analyst pours cold water on Telecom report).
The commission named Telecom's Total Home package - which bundles home broadband with local calls and tolls - is given as an example of a service that should be deregulated given current "low uptake" and commercial alternatives for customers in many areas.
Telecom has long being pushing for lighter regulation in light of the government's fibre-based, $1.35 billion ultrafast broadband (UFB) project, and immediately issued a statement welcoming the commission's report.
Chief executive Paul Reynolds has asserted many times that the Telecommunications Act, which regulates Telecom's operation, was written for a copper world, and is impractical and expensive for his company as the transition to fibre beckons.
There will now likely be a round of trench warfare as Telecom's competitors, and interest groups, weigh the impact of the suggested deregulation.
Complicating the picture, Telecom is the priority bidder for 25 Crown Fibre regions.
The company has agreed to split if it wins Crown Fibre business.
In a presentation to shareholders, Telecom saw its Wholesale division becoming parts of its envisaged retail company - while many rivals would see it naturally falling into the spun-off service company.
Another wrinkle: public-private Local Fibre Companies set up under the UFB scheme will enjoy a so-called ten-year regulatory holiday from Commerce Commission scrutiny under a Telecommunications Act amendment bill introduced to Parliament last week.
Telecom will want a quid pro for its copper services that will have to compete with emerging fibre services.
The current landscape
Retail services such as residential lines and broadband services are offered by Telecom to wholesale customers to resell at a discount to the Telecom retail price – these are known as resale services, and are currently provided commercially by Telecom’s wholesale division.
Resale services are subject to the Telecommunications Act so that wholesale customers, in the event that they are unable to agree commercial terms with Telecom, have the ability to ask the Commission to determine the terms and conditions (including price) for supply of these services by Telecom. The Commission’s recommendation is that resold broadband services, data services and bundled resale services (the reselling of bundles such as Telecom’s Total Home) should no longer be subject to the Act, given the current low take up of the services and the availability of alternative services.
The Commission has recommended that where there are limited alternatives, and a significant take up of resale services (such as residential and business lines, and smartphone services like Call Minder), these services should remain subject to the Act.
The Commission has also recommended that the ability for wholesale customers to gain access to parts of a retail bundle offered by Telecom should be retained.
The Commission’s recommendation is based on our view that regulatory intervention in telecommunications markets should be scaled back in areas where we consider there is effective competition, or where alternative services are available to access seekers,” said Telecommunications Commissioner Dr Ross Patterson.
Crown Fibre reshaping landscape
“With the roll out of ultra fast broadband reshaping the telecommunications environment, the Commission’s recommendation is predicated on the existing regulated wholesale services, such as the unbundled bitstream service, being accessible as the next step on the investment ladder for telecommunications operators. It is critical that the regulated wholesale services remain a viable alternative to the resale services which are recommended to be deregulated.”
The final report can be downloaded from the Commission’s website at www.comcom.govt.nz/resale-services-investigation
