Eleven telcos, consumer groups unite against Crown Fibre bill

Eleven of New Zealand’s major telecommunications companies and consumer-advocate groups have united to oppose legislation that creates new telecommunications industry regulations for the Crown Fibre age, and allows Telecom to split - with its spun off network arm able to buy into lines or fibre companies. The bill also allows for the Crown to buy into Telecom.

The group, including Vodafone, 2degrees, TelstraClear, Call Plus, Kordia/Orcon, Opto Network and Torotoro Waea as well as , Federated Farmers, Consumer New Zealand, the Telecommunications Users Association (Tuanz), and InternetNZ, have sent a joint letter to all MPs outlining their concerns with UFB initiatives in the proposed Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill.

Tuanz  Chief Executive Paul Brislen said while the group fully supports broadband infrastructure investment, the letter outlines the group’s fears that the Bill would reduce competition and investment in New Zealand’s telecommunications market.

“Chief among our concerns are the Bill’s proposals to give successful fibre company bidders a ten year ‘holiday’ from regulation, and the removal from the consumer watchdog Commerce Commission of any oversight of prices and services until 2020.

“In our view the regulatory holiday should be scrapped or at the least substantially modified, and the consumers’ champion - the Commerce Commission - should be allowed to do its job,” Mr Brislen said.

Prices were also likely to increase by over 20% for all urban consumers whose broadband was carried over copper telephone lines.

The bill would also allow Telecom to create a new, wholesale monopoly when it was separated into two businesses, Mr Brislen said.

“In our view, there must be more checks and balances on how Telecom separates and the new monopoly that is created."

While consumer groups and the broader industry agree the Bill needed to be improved, papers obtained under the Official Information Act reveal the Commerce Commission also agrees advising that ‘substantial risks to competition’ exist.

Statements by communications minister Steven Joyce that no monopoly will be created, that a ‘regulatory holiday’ is necessary, and contracts between Crown Fibre Holdings and successful fibre company bidders will protect consumers are not reassuring.

There is nothing in the legislation to prevent fibre companies from increasing prices and degrading services, and regulatory holidays are banned in the European Union and by the WTO, Brislen says.

“If there is no issue, why deliberately legislate to prevent the Commerce Commission from doing its job?”, Mr Brislen asked.

Joyce unmoved
At the TelCon11 conference in Auckland last week, Mr Joyce said Crown Fibre companies could not act as monopolists because each would start with zero customers. If they priced too high, they would not attract consumers, who would have the alternative of staying with copper DSL broadband.

The minister also maintained that without the 10-year " regulatory holiday, or "forbearance period", investors would "price in" the risk of Commerce Commission interferance - driving up pricing. 

At the time it was added to a revised version of the UFB tender, Mr Joyce described the regulatory holiday as a "pragmatic" move necessary to attract more private investment.

Mr Joyce noted that pricing was also contractually agreet at the start of Crown Fibre Holdings' decade-long period of co-investment in each Local Fibre Company; it could go down, but it could not go up.

InternetNZ chief executive Vikram Kumar has raised the concern that the pricing looks good today, but might not be so attractive later if it falls in New Zealand more slowly than elsewhere.

Fear that today's copper phone and broadband services could cost more
Orcon chief executive Scott Bartlett told NBR his greatest concern with the legislation was its provision for "averaging" copper wholesale pricing between urban and rural areas - which, when it kicks in after three years, could have the effect of driving up the cost of copper services as a negative incentive to move people to fibre.

At TelCon11, Mr Joyce said there had been no discussion of a "forced migration" from copper, but qualified that he could not speak for future governments.