“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.

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.