Easy to take a simplistic view of telco review

TOM PULLAR-STRECKER
Last updated 13:05 08/02/2013

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OPINION: The Government has performed a u-turn by deciding to overhaul the rules underpinning telecommunications regulation less than two years after it rewrote the Telecommunications Act in 2011.

The about-face will inevitably be portrayed by lobby groups and opposition MPs as a blow for consumers, who can't now expect to benefit from lower regulated pricing for copper broadband prices, and as a concession to vested interests such as investors in Chorus.

There is certainly some validity to that view, but it is simplistic.

An unavoidable consequence of the structural separation of Telecom was that the Commerce Commission had to be instructed to review wholesale copper broadband pricing and to set a price that was based more closely on Chorus' costs in providing the service.

Almost inevitably, that implied it recommend a steep price cut.

But with the Commission having duly done its job, panic set in.

What if people didn't switch to ultrafast broadband because copper was cheaper? What if Chorus' drop in income undermined the company to such an extent that it just couldn't afford to build the UFB network?

The resignation of Chorus' top engineer, Chris Dyhrberg, yesterday would not have soothed nerves. It seemed an early warning sign the company might not be coping with its Crown commitments.

The Government always intended to review the regulatory regime and put in place new rules that would apply once the UFB network had been completed in 2019 and UFB effectively became a private-public monopoly.

By bringing forward that review, Communications Minister Amy Adams has signalled the price of copper broadband will not be slashed and the migration to UFB will be accelerated. It is a ministerial review and the role of the Commission will essentially be that of a spectator.

Critics will argue the upshot will be that copper broadband users will be cross-subsidising UFB, and that - especially unfair - those who live in areas where UFB will be deployed late or not at all will have to pay the biggest subsidies.

The counter-argument is that the Government's investment in UFB always hung on the premise that there would be significant "externalities" - overall gains to society - from getting the vast of bulk of town and city-dwellers on to a ubiquitous ultrafast communications network, and that doing whatever it takes to complete that migration quickly is therefore in everyone's interests. Otherwise, why is the Crown making the investment in UFB at all?

In many ways, the debate we about to have between supporters and opponents of today's announcement will simply be another relitigation of that question.

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- BusinessDay.co.nz

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