Costs of Government’s Telecommunications Levy to be passed on to consumers

Forums › New Zealand Broadband › Costs of Government’s Telecommunications Levy to be passed on to consumers

freitasm

BDFL - Memuneh
79306 posts

Uber Geek

Administrator

ID Verified

Trusted

Geekzone

Lifetime subscriber

#173426 22-May-2015 18:03

Just received:

“Spark New Zealand supports the expansion of broadband and mobile connectivity in rural New Zealand,” says Managing Director Simon Moutter.

“We’re already investing heavily in rural connectivity infrastructure and we know just how important access to modern telecommunications technology is to our customers in rural New Zealand,” says Mr Moutter.

“That said, we are disappointed that the Government has chosen to fund increased investments in rural infrastructure that is uneconomic for the market to cover, through a levy on the industry and its customers, rather than by using Government funds.”

“When the Government passed the initial legislation for the Telecommunications Development Levy in 2011, it committed in legislation that the Levy would reduce from $50 million per annum to $10 million in 2016. The changes announced by the Government mean this reduction will not happen, and therefore represent a new cost that we will have to pass through to our customers.”

The $50 million annual liability is allocated across 20 telecommunications providers by the New Zealand Commerce Commission, based on a proportion of their qualifying revenue.

“The bill for this from the Government to Spark New Zealand averages out at almost $1 per month for each of our consumer and business broadband and mobile customers.

“Now that the Government has confirmed the levy will continue, rather than reduce as originally legislated for, it has put upward pressure on future costs and we will have to pass that cost through to our broadband and on-account mobile customers. We are exploring options for adding this cost in a transparent way to our customers’ monthly statements so they understand the contribution they are making to the Government’s Telecommunications Development Levy fund,” says Mr Moutter.

Separating out charges such as this levy on customers’ bills is a similar approach to that taken in air travel, which include levies from border agencies and airport departure taxes when people purchase their tickets, and power companies that separate out line charges and energy industry levies on customers’ monthly bills.

Also from the TCF:

The Telecommunications Forum (TCF) is concerned about the process the Government has followed to extend a tax on the telecommunications industry to pay for the extension to rural broadband. Following the Budget announcements, the Government tabled a Bill in the House under urgency, to extend the Telecommunications Development Levy in order to tax the industry to pay for the next round of the rural broadband initiative.

Geoff Thorn, the TCF CEO said “This Bill has been introduced under urgency and doing so avoids any public debate. This is a proposal which has not been the subject of any consultation and which has avoided the usual scrutiny of that would apply to Government spending.

“The TCF supports expanding broadband to New Zealanders wherever they are, and the industry is investing billions to support this goal. The Government’s initiative to partly subsidise the build of the fibre networks (UFB) to urban New Zealand is a positive investment for all.

However, extending the rural broadband initiative and taxing the industry to fund it, is not only inconsistent with the funding approach for UFB, but is a financial burden the industry cannot afford as it deals with declining revenues and profits.

“The Bill extends a tax, which to date, has not been explicitly recovered from consumers. However, the industry cannot continue to absorb ongoing costs of this magnitude.”

MBIE is proposing further changes to the Telecommunications Development Levy. Geoff Thorn said “The TCF is now concerned about the industry’s opportunity to be consulted on these changes, and for the industry to propose further changes.

1 | 2

28191 posts

Uber Geek

Trusted

Lifetime subscriber

#1310168 22-May-2015 21:36

Good, stick it on the bill as a universal service levy so it is quite clear to everybody how much they are propping up the rural connections by, rather than hiding it in general taxes.

That way the next time some whopwhop town complains about their conklin we can point at those bills and say we are already paying more than we should so that they even have internet.

Richard rich.ms

mattwnz

20164 posts

Uber Geek

#1310201 22-May-2015 22:06

Without such a levy, it encourages more and more people to live in Auckland and other cities, which creates the need for other more expensive infrastruture and housing problems. So I can see the government are looking at the bigger picture here. Much of rural NZ doesn't have affordable interent that you could even call broadband. The pricing is huge. I did look into it and the caps are tiny, and the speed is slow, that it meant I didn't move into the rural area I wanted to move into, as I need good internet speeds. The RBI needs significant investment.
The levy isn't increasing is it?... because if it isn't increasing then telcos should be raising their pricing. If it was removed, that would just increase their margin, as I doubt they would reduvce the fees, so I doubt it would be of much benefit to consumers. They can also increase their margin by increasing their prices, but competition to some extent prevents this occurring.

raytaylor

4017 posts

Uber Geek

Trusted

#1310237 23-May-2015 02:04

The TDL has been in place since 2011, spark have had their pricing set accordingly. If they have been willing to absorb the cost, then they can continue to do so. Theresa would never have allowed that under the goodness of their corporate heart.

So if spark had planned a price change after the TDL expired, they have not announced it, and therefore dont need to continue down the path of announcing it. The cost of the TDL is therefore already being passed to the consumer, and nothing is changing.

Edit: I guess they are using it as an excuse for a future price hike, and it gives them a chance to begin american-style below-the-line charges.

Ray Taylor

There is no place like localhost

Spreadsheet for Comparing Electricity Plans Here

raytaylor

4017 posts

Uber Geek

Trusted

#1310238 23-May-2015 02:16

richms:

That way the next time some whopwhop town complains about their conklin we can point at those bills and say we are already paying more than we should so that they even have internet.

To be honest I actually like that idea. Most rural folk take it for granted that us city-dwellers are paying extra to subsidize their landline service. It annoys me because they want something for nothing.

But we must also acknowledge that
a) These people are the backbone of our economy
b) They should be able to get broadband access at a reasonable cost. I do believe it should be still higher than urban rates, but not high to make it unaffordable.
c) Chorus or other telcos are businesses and wont fund the infrastructure in these areas because it simply does not make fiduciary sense. Therefore the only way to achieve the goal is a levy and grant system. The advantage is that it secures our backbone economy from missing out and being disadvantaged by future technological advancements.

So its the lesser of two evils (in a way)
Either subsidise the infrastrucure now, at a cost to everyone and have the backbone economy performing well to support other local industries.
Or dont subsidise them, have them underperform in the coming years, and that economic slump is passed on to the city-dwellers in the future.

But the key is that the next TDL funded projects need to be changed because we all know RBI1 has not met its objectives. So RBI2 needs to be different - something that labour cannot understand.

To labour I ask
Why delay this funding, so a "proper assessment" can be made of RBI1? We all know its failed.
And if you had read the RBI2 documents from MBIE, you will know its a very different project with different objectives. Therefore there is no need to dwell on the past.

Ray Taylor

There is no place like localhost

Spreadsheet for Comparing Electricity Plans Here

hotrok

71 posts

Master Geek

#1311069 25-May-2015 09:28

I agree that those in rural communities should pay more for there connection but there needs to be half decent connection in the first place. Chicken and Egg syndrome.........

sbiddle

30853 posts

Uber Geek

Retired Mod

Trusted

Biddle Corp

Lifetime subscriber

#1311076 25-May-2015 09:38

hotrok: I agree that those in rural communities should pay more for there connection but there needs to be half decent connection in the first place. Chicken and Egg syndrome.........

I agree that rural people should pay more as well. The problem is they don't see it this way.

We've also seen the price of copper move up in urban areas as of 1st December as well because the split between urban and rural has been removed, and averaged out.

lxsw20

3555 posts

Uber Geek

Subscriber

#1311077 25-May-2015 09:40

raytaylor: a) These people are the backbone of our economy

It's amazing how quickly people forget what our primary export market is.

Quic Broadband

Move to New Zealand's best fibre broadband service (affiliate link). Free setup code: R587125ERQ6VE. Note that to use Quic Broadband you must be comfortable with configuring your own router.

shk292

2858 posts

Uber Geek

Lifetime subscriber

#1311084 25-May-2015 09:50

What are these "government funds" of which Spark speaks? I assume they mean taxes, unless they believe the government should just print more money?

So the question really is, should telecommunications consumers pay the levy, or general taxpayers? My vote is for the consumers paying; it is more transparent and attributable. And rural NZ with our primary industries totally needs the infrastructure to be upgraded

NonprayingMantis

6434 posts

Uber Geek

#1311087 25-May-2015 09:56

It would be quite good if they applied the surcharge ONLY to rural customers. So rather than spreading the cost over the whole of NZ at $1 each, they could charge rural people, say, $3 each (or whatever the charge needs to be depending on the rural/urban split) and leave urban pricing alone

That way, the people who are getting the service are the ones actually paying for it.

(but maybe that idea is just too crazy idk)

wellygary

8331 posts

Uber Geek

#1311097 25-May-2015 10:12

Its a bit rich to complain about this now, it was announced before the 2014 Election as National Party policy,

Hon Amy Adams

National Party Spokesperson for Communications and Information Technology

26 August 2014 Media Statement

$150 million boost for Rural Broadband Initiative

“Therefore, if re-elected, we will legislate a three-year extension of the current Telecommunications Development Levy of $50 million a year to create a new $150 million extension of the Rural Broadband Initiative. The levy is currently set at $50 million a year until June 2016, and will now be extended at $50 million a year until June 2019.

In addition to improving broadband in rural areas, National will also create a $50 million fund to extend mobile coverage in the more remote parts of New Zealand, and fill black spots on main highways and in key tourist areas.

I look forward to all the moaners turning their phones off when they go to visit the west coast of the south island or other remote tourist spots and find new cellular coverage paif for by this.....

NonprayingMantis

6434 posts

Uber Geek

#1311099 25-May-2015 10:16

wellygary: Its a bit rich to complain about this now, it was announced before the 2014 Election as National Party policy,

Hon Amy Adams
National Party Spokesperson for Communications and Information Technology
26 August 2014 Media Statement
$150 million boost for Rural Broadband Initiative
“Therefore, if re-elected, we will legislate a three-year extension of the current Telecommunications Development Levy of $50 million a year to create a new $150 million extension of the Rural Broadband Initiative. The levy is currently set at $50 million a year until June 2016, and will now be extended at $50 million a year until June 2019.

In addition to improving broadband in rural areas, National will also create a $50 million fund to extend mobile coverage in the more remote parts of New Zealand, and fill black spots on main highways and in key tourist areas.

I look forward to all the moaners turning their phones off when they go to visit the west coast of the south island or other remote tourist spots and find new cellular coverage paif for by this.....

ah, but to be fair, what National announce pre-election and then what they actually do is often very different. :P

k1wi

484 posts

Ultimate Geek

#1311196 25-May-2015 11:46

I don't really have a set position on this, because I prefer to look at the arguments of both sides. You could debate any of these issue for days and still be no where closer to resolution.

Kiwishare historically subsidised more expensive rural connections, so there is precedence within the telecommunication industry. But precedence is not in itself a reason to do something.

Given the pretty serious social isolation problems in rural areas you could probably argue that there is a public health component to improving rural connectivity. Even more so if it piggybacks off of improvements to hospital/GP clinic connections.

Globally, 'market forces' have been pushing/pulling people to urban areas ever since the British Agricultural Revolution and attempting to manipulate those forces is usually a losing, or at least very expensive, battle. In this case the manipulation is making rural areas less 'unattractive' though programs such as mitigating the cost of relatively poorer internet connectivity. Finding the balance between maximising city output [and thus higher GDP] and emptying rural communities is always going to be a matter of opinion and debate.

Even within the urban/rural divide or within UFB/RBI there will be significant differences between the cost of the cheapest and most expensive cost of supply, so there will always be a degree of subsidization going on, so why stop at urban rural?

You could also probably draw an analogy between urban/rural roads and urban/rural internet and how much funding is spent there. You know, if you ran out of conversation at a dinner party or something.

What I will say is that for a while there was talk that internet technologies would attract more people to rural areas, by making them more accessible. 'You can reach me by email anywhere!' But the evidence is now showing that relative access clearly trumps the absolute level of access.

Publius

276 posts

Ultimate Geek

#1311288 25-May-2015 13:17

As much as I don't like the idea of urban subsidising rural, at least this one provides cell phone coverage to obscure parts of NZ which is useful for urban people on holiday / etc and doesn't cost much per user.

If you're worried about cross-subsidies, then think about how much it costs a telco to backhaul a ufb/dsl circut from anywhere that's not auckland! That's a clear case of Auckland subsidising the rest of the country just there (backhaul costs, not circuit costs).

DarthKermit

5346 posts

Uber Geek

Trusted

#1311450 25-May-2015 17:12

raytaylor: Most rural folk take it for granted that us city-dwellers are paying extra to subsidize their landline service. It annoys me because they want something for nothing.

But we must also acknowledge that
a) These people are the backbone of our economy
b) They should be able to get broadband access at a reasonable cost. I do believe it should be still higher than urban rates, but not high to make it unaffordable.

On the flip side, we're told by the likes of Fonterra that we as consumers have to pay the international market price for commodities like milk. No discount (subsidy) for NZ consumers.

It's a double standard for people like farmers to then expect telecommunications to be subsidised by the rest of the population.

Whatifthespacekeyhadneverbeeninvented?

mattwnz

20164 posts

Uber Geek

#1311455 25-May-2015 17:24

hotrok: I agree that those in rural communities should pay more for there connection but there needs to be half decent connection in the first place. Chicken and Egg syndrome.........

But where does it end. Shouldn't rural people also pay more for road taxes, doctors visits, power etc, as I am sure they would cost more per capita to provide those services, due to the lower concentration of people. They do possibly pay slightly more , but the cost I expect is largely subsidized by the NZ tax pool. The thing is that spreading the cost across a large pool of people dilutes the cost, otherwise it is not economically feasible to provide it to those rural areas. This is largely how insurance works too. Providing UFB in cities is relatively cheap, vs providing it in rural areas, is relatively expensive. People do need to remember that the government are about servicing the entire country, not just people living in the cities.
People who live in cities also need to realise that they may go to a rural area on holiday or work, and may need to access their cloud based software. So on those occasions, any additional levy they would have paid to service rural areas would pay for itself, to provide a good level of broadband service. Not to mention that much of NZs income from overseas comes from rural NZ, and we also want our tourists enjoying good internet as they travel the country.

1 | 2