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Topic # 28723 9-Dec-2008 15:37 Send private message

Got this information today:


Time for the TSO to be scrapped


The latest Telecommunications Services Obligation (TSO) draft determination from the Commerce Commission simply reinforces the urgent need for the TSO to be scrapped.

Not only has the overall cost of providing basic telephone services to rural New Zealand increased, but new entrant NZ Communications is forced to pay its TSO levy to Telecom before it has a single New Zealand retail customer on its books.

Vodafone GM of corporate affairs, Tom Chignell, says this is a gross distortion of the aim of the TSO which was to ensure service was provided to all New Zealanders.

“Having to pay the country’s incumbent telco before even launching a service on the network simply proves that the TSO is a tax on competition. Since the industry was told it had to pay for the upkeep of these so-called ‘commercially non-viable customers’, the total cost has ballooned out to $400 million over the eight year period.”

Vodafone says it’s now time to scrap the whole TSO and look for a more cost effective and viable alternative that takes into account the changes in technology in the 18 years since the TSO was first introduced and focuses support on those in the community who find it most difficult to pay.

“Many of these customers are already covered by Vodafone’s existing mobile network and as both Telecom and Vodafone commit to invest in mobile broadband  out to 97% of the country’s population, it’s difficult to understand just why they are ‘commercially non-viable’.  It’s time for us to completely re-think the way we fund those customers who are disadvantaged whether it’s by distance or by income.”

The annual cost of serving this group of customers has more than doubled over the past 7 years from $34 million a year to over $70 million a year. At a time when fixed, mobile and satellite services are dropping in price and equipment costs are declining, this is totally counter intuitive. 

“In an era when the government is calling for increased competition in the market and companies like Vodafone are doing all they can to allow new entrants to come into the market, it is farcical to also require competitors to pay for the privilege before they have a single customer on board.  Let’s not forget that $400 million could have paid for more than a thousand new cell sites or a million mobile phones.”

“As the former minister of communications pointed out last year, Telecom’s investment in rural New Zealand has not kept up with the level of payments received from the rest of the industry. “

Vodafone is calling on the new government to scrap the TSO as soon as possible.





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Juha
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  Reply # 183032 9-Dec-2008 15:50 Send private message





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  Reply # 183038 9-Dec-2008 15:55 Send private message

Can't agree more.

The Kiwi Share was a fantastic piece of legislation to protect NZ consumers at the time Telecom was sold. Move on 20 years and it really is a legacy that should have been history long ago.


ajw

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  Reply # 183098 9-Dec-2008 18:53 Send private message


I totally agree with Vodafone. I find it bizarre that NZ Communications who as yet have not launched a mobile network are expected to contribute to Telecom's coffers. Without upsetting people living in rural areas why should the cost of having a phoneline be heavily subsidised.
If people choose to live in rural areas what is wrong with paying the full cost of providing it.
I do hope urgent amendments are made to the Kiwi Share.

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  Reply # 183105 9-Dec-2008 19:28 Send private message

scrap it, and lets level the playing field

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  Reply # 183109 9-Dec-2008 19:39 Send private message

stevonz: scrap it, and lets level the playing field


Yes, but at the same time to level the playing field the government also needs to instruct the comcom to scrap "retail equalivancy" in the case of Telco's being operationally separate. Telecom Retail should be able to compete with Vodafone without forcing the Wholesale price down for the playing field to be truly equal. That is so say if Vodafone wants to undercut the wholesale price in the market where they don’t have their own equipment, then Telecom Retail should be free to make a move in a similar way without worrying about the wholesale pricing. Telecom Retail is obliged to make a profit in its own right under operational separation so I don't really see this as anti competitive.

I guess what I am saying is even with the TSO gone; the playing field is still not equal.

nzbnw

 








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  Reply # 183113 9-Dec-2008 19:45 Send private message

ajw:
I totally agree with Vodafone. I find it bizarre that NZ Communications who as yet have not launched a mobile network are expected to contribute to Telecom's coffers. Without upsetting people living in rural areas why should the cost of having a phoneline be heavily subsidised.
If people choose to live in rural areas what is wrong with paying the full cost of providing it.
I do hope urgent amendments are made to the Kiwi Share.


They do however contribute to the overall telecommunications market revenue in the form of inbound roaming, perhaps this is why they are obliged to pay a share of the TSO.

nzbnw








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  Reply # 183298 10-Dec-2008 11:46 Send private message

Here is how I understand it (and I could be wrong so feel free to correct me):


 Providing PSTN access and free local calling to rural areas is very expensive on a customer by customer basis.   (think how expensive an exchange/cabinet is to buy and maintain, and then look at areas where there might only 5-10 customers off one exchange)


 When Telecom was nationalised and the only carrier in the country this was fine, as there was no profit making incentive anyway. 

As a privatised company, there is/was no real incentive for them to provide these services to rural customers. So the kiwishare agreement was put into place and it basically required Telecom to provide these services at the same price as urban customers (i.e.below cost) to ensure that no NZers were disadvantaged by the privatisation. (otherwise Telecom would naturally ramp up the cost in rural areas to make a profit)

However, with competitors around who did not have to do this loss making activity and with Telecom unable to increase rural pricing, this would put Telecom at a competitive disadvantage (Competitors being able to only target profitable customers in urban areas and allow Telecom to keep the unprofitable ones) so the incentive given to Telecom to accept these rules was that any competitors had to contribute towards these unprofitable costs to ensure a fair playing field.

 IMO If they want to scrap the TSO payments, then they should also scrap the rules that are the reason behind the TSO i.e. the ones that require Telecom to provide PSTN access and free local calling to every household in NZ.  


Failign that, Vodafone would have a case for scrapping it when they start putting their equipment in rural exchanges instead of just the urban ones.   They won't do that though since it is cost prohibitive (funny that!)

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  Reply # 183302 10-Dec-2008 12:05 Send private message

NonprayingMantis: Here is how I understand it (and I could be wrong so feel free to correct me):


 Providing PSTN access and free local calling to rural areas is very expensive on a customer by customer basis.   (think how expensive an exchange/cabinet is to buy and maintain, and then look at areas where there might only 5-10 customers off one exchange)

That may be, but why would you have to provide a landline under those circumstances, instead of using wireless access?

When Telecom was nationalised and the only carrier in the country this was fine, as there was no profit making incentive anyway.  

Telecom was as far as I know never nationalised. It was however part of the Post and Telegraph Office, a government department.
As a privatised company, there is/was no real incentive for them to provide these services to rural customers.
 
Even if Telecom is contractually obliged to do so?
So the kiwishare agreement was put into place and it basically required Telecom to provide these services at below cost to ensure that no NZers were disadvantaged by the privatisation. (otherwise Telecom would naturally ramp up the cost in rural areas to make a profit)

I think you'll find the Kiwi Share was part of the privatisation of Telecom in 1990. It formed part of the sale of Telecom.
However, with competitors around who did not have to do this loss making activity and with Telecom unable to increase rural pricing, this would put Telecom at a competitive disadvantage (Competitors being able to only target profitable customers and letting Telecom keep the unprofitable ones) so the incentive to Telecom to accept these rules was that any competitors had to contribute towards these unprofitable costs to ensure a fair playing field.

So why aren't these commercially non-viable customers identified and contestable, so that other providers can take them off Telecom? The number of CNVCs has grown despite there being cheaper technology now that could easily reach anyone in NZ, and they also cost more. Surely something's not right here?

IMO If they want to scrap the TSO payments, then they should also scrap the rules that are the reason behind the TSO i.e. the ones that require Telecom to provide PSTN access and free local calling to every household in NZ.  

No, just let other providers take over the customers under the same terms as Telecom but with a technology neutral platform to provide them with unmetered local calling (note that there is no free local calling in NZ - we pay a fixed monthly fee instead) and dial-up networking ability. 




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  Reply # 183795 12-Dec-2008 23:07 Send private message

juha:
So why aren't these commercially non-viable customers identified and contestable, so that other providers can take them off Telecom? The number of CNVCs has grown despite there being cheaper technology now that could easily reach anyone in NZ, and they also cost more. Surely something's not right here?


I agree.  Government should be transparent and it's just not when it comes to telecommunications is it?!

Vodafone and others now have wireless services.  Why is all of this money being pumped back in to Telecom each year to provide the services at 'their costs'? (or have I got the wrong message here?)

Cheers Don

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  Reply # 183807 13-Dec-2008 01:11 Send private message

$1b of mobile investment and not a WiMAX network in sight.

3G won, cut the copper and the TSO




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