Regulatory holiday, secrecy attacked on telecomms reforms

The 10-year period of “regulatory forbearance” for Local Fibre Companies supplying the Ultra Fast Broadband network will be the prime target of submitters on the Telecommunications Amendment Bill, if they follow the advice of convenors of a joint InternetNZ/TUANZ seminar on the Bill held in Wellington this week.

Under the proposed Bill, Crown Fibre Holdings sets the pricing for access to the new network, in consultation with ICT Minister Steven Joyce. At the seminar lawyer Michael Wigley said this means the Commerce Commission won’t be involved in the vast majority of the regulatory functions it discharges under the current Telecommunications Act for a decade. “The regulator is not regulating in the full sense. This is a bloody big change,” he said.

This “regulation by contract” will make it difficult to settle the “right” price in a small market, said Wigley and “difficult to replicate what a regulator might otherwise do.”

Wigley and a number of others at the seminar see normal regulation offering a more certain environment than having the decisions in the hands of politicians and hostage to a three-yearly election cycle.

Parliament has the legal right to override the arrangement; Wigley said “there’s no way it can be locked in for ever. Labour has said it will revisit this issue if elected; they can reverse the regulatory forbearance and even reverse the contracts with whoever gets them.”

Considerable uncertainty still attends the current Bill, said InternetNZ policy director Jordan Carter. At least one supplementary order paper will be tabled. “We’re hopeful that will [first] be released for public scrutiny,” he said. There will not be a repeat of the situation with the Copyright Bill, when an SOP was tabled three days before the debate, leaving no time for public comment.

CFH is simultaneously in the position of regulator, investor and network operating company, Carter said. “That’s pretty amazing; you get to write the rules for your own investment and if things aren’t going the way you like, you can just change them.”

Confidentiality surrounds the negotiations, he said. “Some of you in this room have seen those contracts or drafts; most of us haven’t and we won’t see the pricing involved or any price review mechanisms that might be included until after the agreements are signed.”

Inadequate research has been done on the demand side, said several speakers; the potential uses of the network and the advantages it would offer to businesses have not been quantified. UFB is like “buying a whole lot of computers without any software or training”, said former TUANZ chairman Chris O’Connell.

No-one could accurately predict what devices and application might emerge within the timeframe of the UFB plan, said consultant Simon Riley; that is the nature of ICT - any discussion was bound to be inconclusive. “At the end of the day, we’re at the mercy of another marketplace; but given the right price-points and the right access to platforms, there will be enough innovation.”

However, a key question is the relative appeal of fibre and the existing copper network with DSL, Riley said. “If I’m getting 10 Mbits/s over copper, why would I shift to fibre?”

Vaughan Baker, chief executive of the NZ Regional Fibre Group, confirmed that he knew more about the underlying strategy but was barred under a non-disclosure agreement from telling the meeting. However, some of the information attendees were looking for could be gleaned by “reading between the lines of the Minster’s speeches”, he said.

Several speakers expressed annoyance that not enough information could be released for a detailed discussion on the strategy. Commercial factors are thoroughly mixed with what should be democratic decision-making, said Carter.

“Parliament will be told ‘this is commercial; we’ve worked it out” and would be expected to rubber-stamp it, said Ross Young of TelstraClear.