Govt plans to phase out controversial Telecom levy

Forums › Spark New Zealand (including Skinny and BigPipe) › Govt plans to phase out controversial Telecom levy

djrm

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#42209 30-Sep-2009 15:43

So what exactly have Telecom been spending this money on??

I am classified a one of the unprofitable and barely have a phone line. No chance of call waiting, caller ID etc, just a basic, noisy phone line.

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#259761 30-Sep-2009 15:48

huh? a link to the article that you read this on might help..

tonyhughes

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#259766 30-Sep-2009 15:55

I would also be keen to see who is saying it will be phased out.

It is up for overhauling, but not being phased out.

djrm

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#259767 30-Sep-2009 15:55

I am sorry, its been all over the news this week.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10600372

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10600400

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djrm

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#259769 30-Sep-2009 15:58

The MED announced this that it will be phased out over the next 5 years, I think, and reduced to $50 for those 5 years instead of $23 million per year - if I read it correctly.

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tonyhughes

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#259774 30-Sep-2009 16:12

Ok, so the levy is being phased out, but contributions will still be expected to broadband rollout... sounds like a levy to me!

djrm

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#259777 30-Sep-2009 16:15

Ah, but money for rural broadband may not go to Telecom, may go to a different bidding company i.e. Vector.

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tonyhughes

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#259782 30-Sep-2009 16:24

It's still the same concept. Paying for another company to support the clients you have deemed uneconomical (or unreachable / outside your market).

NonprayingMantis

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#259791 30-Sep-2009 16:39

tonyhughes: It's still the same concept. Paying for another company to support the clients you have deemed uneconomical (or unreachable / outside your market).

the thing that strikes me as wierd is not so much that they want to stop the TSO levy, but that they are still keeping the restrictions for Telecom in place.

IOW, Telecom is still forced to provide these customers with access and free local calling despite it costing them far more to do so than they recieve in revenue.

Correct me if I'm wrong, but the TSO basically said

1) Telecom must continue to provide uneconomical customers with access and free local calling at the same price as the rest of the country gets it i.e. $40-50 per month,

but to balance the fact that those customers cost many times that to manage....

2) The industry will bear the loss as a whole, each company in proportion to their market share.

It seems they have removed part 2, but kept part 1.
Is my understanding basically correct? If so, that seems pretty bizarre

By removing the levy they are implying that the customers are not uneconomical. But if that is the case, and I don't think it is, why continue to force telecom to maintain them? Surely if the customers are not uneconomical there is no need to force that, since Telecom (or indeed another telco) would be quite willing to service them without any need for force.

VFNZPaulBrislen

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#259798 30-Sep-2009 17:09

The TSO requirements (part one of your post) were included in the sale price of Telecom back when it was privatised and sold off... the idea that Telecom should be paid a compensation to keep those conditions live for commercially non-viable customers was added in 2001 with no consultation.

It was wrong in 2001 and it's wrong today. $70m a year to provide access to dial-up internet service for 58,000 households is astonishing, particularly when you realise the customers still have to actually buy a service on top of that.

The new rural broadband pool should sort that out I would hope. The MED document looks really interesting.

Cheers

Paul

Paul Brislen
Head of Corporate Communications
Vodafone

http://forum.vodafone.co.nz

djrm

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#259839 30-Sep-2009 18:48

I agree, even with free local calls, they must have been reaping the rewards

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freitasm

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#259849 30-Sep-2009 19:22

NonprayingMantis: Surely if the customers are not uneconomical there is no need to force that, since Telecom (or indeed another telco) would be quite willing to service them without any need for force.

It's the same for unbundling broadband. Have you seen Vodafone or Orcon investing in exchanges around Christchurch or Wanaka?

No. They went for gold in Auckland. And Orcon just recently went for Wellington. They won't go where is "uneconomical". I was told by someone from Vodafone that of course they have to do it, to justify investment they have to guarantee returns somehow, so those poor broadbandless people in Timaru will continue to endure Telecom - because Telecom is the only one that is actually deploying the copper to these houses.

See my point?

Companies complain but you don't see them doing anything. My option for unbundling for example would be "you can get two exchanges in Auckland if you deploy your gear inside one exchange in the South Island". If this was regulated then you'd see more broadband around - the way it is now everyone cried foul when Telecom unveiled their cabinet plans.

Same with the TSO. Everyone complains, but no one wants to actually provide the service or roll out the copper to these people.

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bjhoogs

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#259901 30-Sep-2009 22:14

freitasm:
NonprayingMantis: Surely if the customers are not uneconomical there is no need to force that, since Telecom (or indeed another telco) would be quite willing to service them without any need for force.

Same with the TSO. Everyone complains, but no one wants to actually provide the service or roll out the copper to these people.

I think vodafone's point is that the use of copper to provide a service to these people is not the best use of this money.

They can provide local calling for $25 a month over their cell network, and 6gb of mobile broadband is available for an extra $70, so if the cost of maintaining the copper is $40 and 'unlimited' dialup costs $25 per month (after the subsidy) then why not shift the subsidy to the better performing, more appropriate technology?

There is a difference between a customer being uneconomical, and being unable to compete with an inappropriate but subsidised service.

NonprayingMantis

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#259929 1-Oct-2009 00:55

bjhoogs:
freitasm:
NonprayingMantis: Surely if the customers are not uneconomical there is no need to force that, since Telecom (or indeed another telco) would be quite willing to service them without any need for force.

Same with the TSO. Everyone complains, but no one wants to actually provide the service or roll out the copper to these people.

I think vodafone's point is that the use of copper to provide a service to these people is not the best use of this money.

They can provide local calling for $25 a month over their cell network, and 6gb of mobile broadband is available for an extra $70, so if the cost of maintaining the copper is $40 and 'unlimited' dialup costs $25 per month (after the subsidy) then why not shift the subsidy to the better performing, more appropriate technology?

There is a difference between a customer being uneconomical, and being unable to compete with an inappropriate but subsidised service.

lets assume for a moment that these rural customers are even able to get mobile broadband coverage (extremely unlikely given mobile covers only 97% of the population - the remaining 3% being the rural guys who are almost certianly the same uneconomical guys who the TSO provides for)

If so, then why does the government want to keep the part of the TSO where telecom must guarantee access and free local calling at a certain price? If these customers are able to be served by mobile much more cheaply, then let the telcos compete for them that way, and let Telecom shut down it's expensive microwave relays, and exchanges with only 3 customers that cost it so much money ($70m per year apparently).
The changes to the TSO will not do that, because they will still be forcing telecom to make the same services available, and price access and local calling over copper (or microwave radio relay for many of these customers) priced at only ~$50, thus incurring huge losses.

VFNZPaulBrislen

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#259954 1-Oct-2009 08:45

The problem with the TSO as I see it is that it enshrines copper as the only mechanism whereby CNVCs will be offered service, yet the service levels are so low they can be delivered using a 2G GSM cellphone.

14.4kbit/s to 95% of New Zealand, 9.5kbit/s to the remainder.

Clearly the best way to deliver service to those CNVCs is by mobile or satellite service. The new MED document has accepted that and will adjust the situation accordingly.

On top of that, it will role out a rural broadband mandate that will be fiercely contested. Why? Because these customers are not "commercially non-viable" and never have been.

Vodafone estimates we already cover 70% of these customers with our 3G and 3G Extend networks. On top of that you have two Telecom networks covering them (either landline or XT) so we're talking about at least three national networks that cover these customers, plus satellite, plus Kordia's Xtend network...

given all that, how can any of these customers, bar the last couple of percent, be seen to be non-viable?

It's a nonsense and always has been. It's predicated on the analog world idea of communication (that is it's cheaper to phone a local number than one far away, regardless of the technology used) and has no place in the modern world.

Cheers

Paul

Paul Brislen
Head of Corporate Communications
Vodafone

http://forum.vodafone.co.nz

NonprayingMantis

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#259968 1-Oct-2009 09:38

PaulBrislen: The problem with the TSO as I see it is that it enshrines copper as the only mechanism whereby CNVCs will be offered service, yet the service levels are so low they can be delivered using a 2G GSM cellphone.

14.4kbit/s to 95% of New Zealand, 9.5kbit/s to the remainder.

Clearly the best way to deliver service to those CNVCs is by mobile or satellite service. The new MED document has accepted that and will adjust the situation accordingly.

On top of that, it will role out a rural broadband mandate that will be fiercely contested. Why? Because these customers are not "commercially non-viable" and never have been.

Vodafone estimates we already cover 70% of these customers with our 3G and 3G Extend networks. On top of that you have two Telecom networks covering them (either landline or XT) so we're talking about at least three national networks that cover these customers, plus satellite, plus Kordia's Xtend network...

given all that, how can any of these customers, bar the last couple of percent, be seen to be non-viable?

It's a nonsense and always has been. It's predicated on the analog world idea of communication (that is it's cheaper to phone a local number than one far away, regardless of the technology used) and has no place in the modern world.

Cheers

Paul

But this comes back to my question:

Assuming all that is true, why then is the government leaving in place the requirement for Telecom to continue to serve these customers with limited price access and local calling?
to quote the Dom Post:

"Mr Joyce said Telecom should still be obliged to provide landlines at rates capped by inflation and unmetered local calls, but should meet the entire cost of serving uneconomic customers with profits it earned from other customers. "

Is voda forced to serve uneconomic customers? no. Is any other telco forced to serve uneconomic customers? I can't think of any.
Sure you might have some uneconomic customers (every business does) but you are never forced to serve them, and in fact, if you are doing your job you try to identify these customers and get rid of them since they destroy shareholder value.

If, as you say, these customers are economical to serve then there should be no need for that requirement – the industry will be lining up to serve these lovely profitable customers.

It seems on one hand the gov are implying the customers are economical (by removing the levy), but then by leaving the requirement in place to continue serving them they are implying that they are not.

The point being: if they were economical then that requirement would not be needed - Telecom (or voda or whoever) would be happy to compete for those customers.

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