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Government shares more details of plan to adopt utility-style regulation in New Zealand’s telecoms network sector.
The New Zealand government on Tuesday unveiled more details of its plan to overhaul the regulatory regime that will govern the fixed-line market going forward, particularly with regard to the transition from copper networks to high-speed fibre, a move that was welcomed by some of the country’s major telcos.
The Ministry of Business, Innovation and Employment (MBIE) is in the process of reviewing the country’s Telecommunications Act 2001 and aims to make changes to the regulatory landscape for 2020 and beyond. It revealed recently that it is looking to establish a model that mirrors the way utilities like gas and electricity are regulated and this week called for feedback on its proposals.
"The old approach, which was unique to telecommunications and was designed primarily to regulate Telecom New Zealand and the copper network, is no longer fit for purpose," the MBIE said in its new options paper. "Instead, we are looking to utilities regulation using a ‘building blocks’ pricing model (BBM) as a well-known and predictable alternative."
Under BBM, the allowed revenue of a regulated firm is calculated based on various cost and earnings metrics.
The government said its key goals are to ensure a competitive retail market, prevent monopoly profits and incentivise investment in high-quality networks.
Its proposals include the establishment of a system of price-quality regulation that will enable ultrafast broadband providers – that is, national network operator Chorus as well as local fibre companies – to recover their costs and generate a fair return on their assets without being able to make excess profits at the expense of consumers.
It also makes provision for what it terms anchor products that Chorus and the local fibre firms will have to provide to retail operators. There will be three such products, all technology-neutral and all subject to price caps: a basic voice service; an entry-level broadband product that will offer download speeds of up to 15 Mbps and is geared particularly to rural users who may not have access to ultrafast broadband; and a basic broadband product of up to 100 Mbps that should meet a typical broadband user’s needs in 2020 and will act as an economic anchor for other products.
It also set out a number of commercial products with minimum requirements and, as Chorus pointed out, proposed retaining current fibre unbundling requirements from 2020 while removing its copper unbundling requirements from the same date.
Chorus issued a statement welcoming Tuesdays developments.
"It is pleasing to see that the government’s timetable indicates that a more fit for purpose regime can be put in place by 2020, with legislation to be passed in 2017, and that the options paper seeks comments on a stable and efficient transition," said Chorus general counsel Vanessa Oakley.
There were also positive comments from incumbent operator Spark; Chorus was separated from Spark, then Telecom Corp New Zealand, in 2008, with full structural separation taking place in 2011.
"We see this as another step towards the provision of certainty to the industry, and, ultimately, ensuring that New Zealand telecommunications regulation is fit for purpose in the digital age and will support investment and innovation as well as a healthy, competitive market for the benefit of consumers," said Spark general manager for regulation, John Wesley-Smith.
"We are especially pleased to see the importance of network quality regulation recognised in the paper, considering the high level of consumer and industry frustration we are seeing in the current model," he said.
Interested parties have until 19 August to respond to the MBIE’s paper.
