Reseller News

Government telco reforms for 2020 include deregulation of copper

Reform package to deregulate copper networks where UFB is available and reduce compliance costs.
  • Rob O'Neill (New Zealand Reseller News)
  • 01 June, 2017 06:53
A utility-style model of delivery is planned for fibre services by 2020, says Communications Minister Simon Bridges.

A utility-style model of delivery is planned for fibre services by 2020, says Communications Minister Simon Bridges.

The Government is planning a package of telecommunications reforms including the creation of a utility model for Ultra-Fast Broadband (UFB) and the deregulation of copper lines where fibre is available.

Also on the agenda for 2020 is increased regulatory oversight to improve the quality of services.

The proposed changes were welcomed by major telco service provider today, but were described as a "mixed bag for consumers" by internet industry group Internet NZ.

“As the copper network is essentially being replaced by UFB, it is appropriate that copper regulation be removed from 2020," Communications Minister Simon Bridges said. "It makes sense to focus on the services that most people will be using."

Bridges said the Telecommunications Act review will reduce compliance costs for industry and encourage innovation and investment.

Copper will continue to be regulated outside of UFB coverage areas and safeguards will be put in place to make sure customers do not lose their copper landline unless there is an alternative service available at a comparable price and service level, Bridges said.

Wholesale prices for copper services in non-UFB areas will also be inflation adjusted and network operator Chorus will be subject to a revenue cap from 2020.

The plan aims to ensure a clear value is set for regulated assets with a predictable process for updating this over time, a Q&A document (pdf) said.

"There will also be a clear process for approval in advance of new investments, similar to that which applies to the electricity grid operator Transpower," the Government said.

Chorus will be required to supply price-regulated anchor products, initially an entry-level broadband product and a voice-only product.

The Commerce Commission will also be required to set clear rules before 2020 that outline its approach to how assets will be valued and costs recovered.

The Telecommunications Service Obligation (TSO), which provides for price-capped landline and dial-up services, will be removed except in areas where UFB or other fibre is not available.

UFB is currently available to more than one million homes and businesses and it is expected over 85% of New Zealanders will be able to access the high speed network by 2024.

To complement the fixed-line regulations, the Government is also empowering the Commerce Commission to respond quickly to issues in the mobile market and putting in place new measures to lift levels service quality in the sector.

The direct fibre access service used by mobile operators and large businesses to provide dedicated fibre links to mobile towers will also be price-capped.

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As the roll-out of UFB draws to a close, the Government said its contractual arrangements for setting wholesale fibre prices will also fall away. At the same time, demand for new services and capabilities will continue to grow. These changes in technology and market structure need to be supported by a flexible and responsive regulatory regime.

InternetNZ chief executive Jordan Carter said his initial take is that the changes was they represent "a mixed bag for consumers"

"There are some wins for the public here," Carter said. "The new proactive powers for the Commerce Commission, to ask tough questions about the quality of service people can expect, are good to see. There are too many complaints by consumers in the telco sector and it has to change."

On the down side, he said, tweaks and adjustments to the post-2020 framework will see slightly higher copper broadband prices as more money goes to Chorus from users outside the fibre broadband area.

Carter said the Government's proposed 100 down/20 up entry-level fibre product was too slow the last time they proposed it, is too slow today, and will certainly be too slow by 2020.

"The select committee process will be a chance to improve on these decisions by tackling the anchor product challenge, and any other detailed issues that come to light," Carter said.

"All in all, we are pleased to see this review of the Telco Act moving towards a conclusion. The big picture perspective is that this new framework should deliver fair prices for fibre broadband into the future - there are just some further gains we will keep pushing for as the process moves to Parliament and new legislation."

Network operator Chorus welcomed the proposed package, highlighting changes to various valuation methodologies.

“The right regulatory settings for broadband connectivity, which sensibly support efficient investment without costly duplication of utility infrastructure, will ultimately deliver better quality and greater affordability for all Kiwis," Chorus executive Vanessa Oakley said.

“We’ll be taking a keen interest in the next legislative phase of the process which is expected to commence with the introduction of a Bill to Parliament in the second half of 2017.”

Network retailer and mobile operator Spark also welcomed the changes

“Most importantly, the review, and the process to get to this point, has provided certainty to industry providers and their customers of the regulatory settings that will apply to fibre and copper in the period from 2020 onwards," Spark’s general manager regulatory affairs, John Wesley-Smith, said, 

“Giving service providers and network operators a more predictable pathway for the costs we will face from 2020 on will allow us to focus on ensuring we can confidently invest to bring the best of new products, services and innovation to New Zealanders."

Wesley-Smith acknowledged the industry still has work to do on service quality, adding Spark had put a huge amount of effort into addressing the area at Spark and is continuing to do so.

Telecommunications services have become much more important to everyday life and business in New Zealand, and the current regulatory settings needed to be refreshed, Bridges said.

“We have heard from a range of parties as proposals have been developed, and have listened to feedback we received, making a number of changes."

Overall, the Government said, the new regime aims to ensure UFB providers cannot make excessive profits at the expense of consumers yet can achieve reasonable rates of return from ongoing investment.

Earlier this month, the Government's extension to its original UFB roll-out commenced in Northland and on the West Coast.