TSO 'hindering line investment'

Lobby group Tuanz is urging the Government to allow Telecom's competitors to compete for its hard-to-reach customers, saying the status quo under the Telecommunications Service Obligations is anti-competitive and hindering investment.

In its submission on a discussion document on the TSO issued by the Government in August, the telecommunications users' association says the TSO is stifling the introduction of new technology, reducing incentives for telecommunications companies to invest in networks and has resulted in unintended "perverse and anticompetitive" consequences.

The TSO, originally called Kiwi Share, is an agreement between the government and Telecom to retain affordable access to residential phone services by rural and urban customers alike. It was established 17 years ago when Telecom was privatised and ties increases in phone line rentals to the consumer price index and guarantees free local calls.

Tuanz chief executive Ernie Newman said many rural customers could be served profitably by providers other than Telecom using local wireless networks, satellite and fixed/mobile systems, but they were ruled out of competing by the TSO.

The Commerce Commission calculated the cost to Telecom of meeting the TSO at $78.3 million in 2006. About 69 per cent of the cost is met by Telecom and the remainder by other operators, mainly Vodafone and TelstraClear.

The cost to Vodafone since 2001 to the end of the current financial year would be $116 million, Vodafone regulatory manager Hayden Glass said.

"The key thing that upsets us is that we end up subsidising Telecom for its wired network in places where we've already built up our mobile network."

The TSO document notes that consultancy Network Strategies estimated Telecom's average annual level of rural fixed line network investment for both growth and network replacement since 1994 had been less than half the depreciation allowance for an equivalent network.

- © Fairfax NZ News