UFB legislation gives Telecom a ‘free pass’, Vector says

Legislation governing the rules of the government’s $1.35 billion roll-out of ultra-fast broadband will give Telecom Corp. a free pass,” according to rival bidder Vector Ltd.

Vector chief executive Simon Mackenzie told Parliament’s Finance and Expenditure Committee the Telecommunications (TSO, Broadband and Other Matters) Amendment Bill would give free rein to the dominant Telecom.

The supplementary order paper tabled by Communications Minister Steven Joyce last month would leave Telecom free to acquire any other local fibre company or telecommunications firm without regulatory oversight by the Commerce Commission, enabling an unregulated copper business to price in a predatory manner,” Mackenzie said.

It’s really important that Parliament and the rest of New Zealand recognises the supplementary order paper bestows significant market and competition benefits to Telecom and does so when not required,” he said. If Telecom sees separation as an issue for its bid, then surely that’s Telecom’s issue.”

Simon Fuller, chairman of the New Zealand Regional Fibre Group, told the committee Telecom would get special treatment from the SOP over how it would structurally separate, as it would decide how to reallocate its assets and liabilities between the two entities. He said he was concerned that the minister wouldn’t see the phone company’s proposals for 40 days, essentially making it a fait accompli.

With the minister’s office running the stream of a potential Telecom demerger, the Regional Fibre Group was worried Crown Fibre Holdings’ negotiation with the phone company was under the assumption it would separate, but with no detail about how that would occur.

The bill and SOP were intended to ensure Telecom can’t build a dominant position in the telecommunications environment that will emerge as fibre-optic cable and wireless services gradually replace today’s copper-based telephone networks. Telecom has made it to the priority list to win a chunk of government funding, along with Vector and some of the Regional Fibre Group’s members.

Vector wants a calmer approach on regulation, with the principles established by industry and government at the start of the process. That would give capital markets and rating agencies more confidence around the future certainty of the regime, as would a bipartisan approach to the legislation.

The issue of forbearance, which essentially excludes regulatory oversight of the winning bids, initially offers some certainty, but that may falter as longer-term issues emerge, he said. The view to front-load regulation in principle was endorsed by the Regional Fibre Group.

Antony Royal, a spokesman for unsuccessful rural broadband bidder Torotoro Waea, told the committee it appeared there was a lack of vision on the part of the government as to what the end-game is.

My worry here is that we’re going down a really fast track of trying to stitch what we have together to try and make something work without actually figuring out where we actually want to go in the long term,” he said. I think that we have missed an opportunity to really look at where we’re going in telecommunications in the future.”