Commerce Commission to examine domestic backhaul regulation

The Commerce Commission is investigating possible changes to the regulation of domestic backhaul services, saying that access to these services is likely to become increasingly important as the Rural Broadband and Ultra Fast Broadband initiatives deliver higher-speed services to more premises, particularly those outside the main urban centres.

It has kicked off its investigation with the release of discussion paper seeking answers to 19 questions on domestic backhaul. The questions ask for input on how the services have evolved – given the rapid changes in the telecommunications market – and on whether regulation may need to be altered to best promote downstream competition for the long term benefit of consumers.

By domestic backhaul the commission means services that carry internet traffic between the 600 local exchanges and the major exchanges, upstream of which internet service providers have their own national networks and international connections. Backhaul also carries traffic from mobile and fixed wireless sites back to the core networks of service providers.

Commissioner Dr Stephen Gale said:“Backhaul services are a key component of the telecommunications market and critical for ensuring New Zealanders can benefit from access to quality broadband services. We want to explore whether the current regulatory regime is fit for purpose, so we would like to hear from anyone with an interest in this sector.”

Dissatisfaction with the current regime has already emerged. In its submission in May this year of the commission’s examination of other regulated services Spark suggested that the regulated backhaul service had not acted as a constraint on commercial prices. It cited the fact that the Australian regulator, the ACCC, had determined in April 2016 that Australian regional transmission services prices should be reduced by between 13 and 76 percent.

Spark also pointed out that designated backhaul services could only be used for the purpose of connecting specific regulated access services over specific routes, and offered only a limited number of capacity options. “Modern transport systems comfortably support multiple traffic streams within the same link,” Spark said. “Accordingly, an operator using regulated backhaul would inherently be inefficient.”

There are presently three regulated domestic backhaul services, specified under Schedule 1 of the Telecommunications Act, all supplied by Chorus.

-Chorus’ Unbundled Bitstream Access service, which provides transmission capacity between the trunk side of a first data switch (where the UBA service terminates) and the access seeker’s nearest available point of interconnection.

- Chorus’ Unbundled copper local loop service (distribution cabinet to telephone exchange), which provides transmission capacity between Chorus’ distribution cabinet and Chorus’ local exchange.

-Chorus’ Unbundled copper local loop service (telephone exchange to interconnect point), which provides transmission capacity between Chorus’ local exchange and the access seeker’s nearest available point of interconnection.

The commission is seeking input to the paper A Section 9A Backhaul Study: Preliminary questions in understanding domestic backhaul services by 23 September 2016. It aims to release its draft report in February 2017 and after receiving further submissions and consulting with industry, to release is final report in June 2017.