Labour, which has until now only nibbled around the edges in its criticism of the government's $1.35 billion ultrafast broadband (UFB) Crown initiative, today made its first concrete attack on the Crown fibre scheme.
Through communications spokeswoman Clare Curran, Labour today announced it opposed the government proposal to remove regulation of ultrafast broadband by excluding UFB from the Telecommunications Act until 2020.
Critics - including IP lawyer and NBR guest columnist Michael Wigley* - call this effective exemption from Commerce Commission scrutiny a "10-year regulatory holiday" for Crown fibre contract winners.
Communications Minister Steven Joyce has framed the move - one of several revisions to the original tender as pragmatic and necessary to attract private investment.
The modified tender was welcomed by most bidders, with the notable exception of Canadian contender Axia NetMedia whose chief executive, Al Munro, told NBR that he strongly opposed UFB's exception from regulation.
Axia, which has won public-private fibre business in Singapore, Spain and France, was the only company to be knocked out of UFB bidding in the first round as Crown Fibre Holdings announced its shortlist.
NBR understands that Auckland Crown fibre contender Vector - whose lines operation and the profit it can draw from it is tightly regulated – is at the other end of the spectrum, strongly favouring the regulatory holiday. It's safe to say most of its competition feels the same way.
Vector chief executive Simon Mackenzie offered NBR a measured statement this afternoon, saying "This is a key topic of discussion with the MED and Crown Fibre Holdings. Its complexity lies in the degree of network competition in LFC [Local Fibre Company] markets in respect to Telecom and other operators – which will clearly be determined by the outcome of the bid process."
No promise to remove, but will review
Ms Curran said Labour was unconvinced that there is a compelling case to remove normal regulatory controls on UFB pricing.
“If the government succeeds in passing changes to the Telecommunications Act to achieve this aim, Labour will review them in our first term, should we win government,” she said.
“In July, the government quietly announced that until 2020, UFB pricing payable by access seekers would be set sole by contractual negotiation with CFH with adjustments only to reflect inflation and/or price changes agreed by both CFH and the partner (yet to be announced).
“At the time Labour expressed serious concerns that the revelation that the Local Fibre Companies (LFCs), the private public partnerships set up to manage the $1.5 billion broadband project, will enjoy a 10 year regulatory holiday meant locking out the Commerce Commission from reviewing prices for fibre available to New Zealand consumers.
Not buying investor-friendly argument
Ms Curran said she did not buy Mr Joyce's argument that the regulatory holiday would help draw investors to the risky "green fields" of fibre.
“Labour is not convinced about that argument. The Telecommunications Act already requires regulators to take a long term view that must have regard to investment issues
“Instead the proposed change weakens hard fought legislative protections for consumers and exposes the public to an unnecessary risk of future monopolistic practices,” Clare Curran said.
“The pace of technology change is very fast. Who knows what the industry will look like in five years time, let alone ten.
“Locking up the industry into a pric-esetting regime with no independent oversight is short sighted and possibly negligent."
* Read Mr Wigley's analysis in this Friday's print edition of NBR
Wed, 13 Oct 2010