TSO Update: Net cost calculation & TSO instrument
The Commerce Commission is required under the Telecommunications Act to determine annually the net cost to Telecom of
providing local residential telephone services under Telecom's Telecommunications Service Obligation (TSO), and to
apportion that cost across both Telecom itself and other network operators.
As an input to the Commission's process, Telecom is required under the Act to provide the Commission with its own net
cost calculation not later than 60 working days after the end of its financial year. Telecom provided its TSO
calculation to the Commission within the statutory timeframe on Friday 20 September.
Telecom's calculation of the net cost of complying with the TSO for local residential telephone service, for the period
from 20 December 2001 (the commencement date of the Act) to 30 June 2002 (a period of 6 months and 12 days), was $226.5
million. The Commission has requested Telecom to also supply a revised calculation in accordance with parameters set by
the Commission. Telecom has agreed to provide that revised calculation by October 18.
Both Telecom calculations will be considered by the Commission in making its decision on the net cost figure to be used
to apportion the cost across the industry.
Assessment of compliance with TSO instrument Telecom is required under the Act to provide the Commission with an annual
assessment of compliance with the service quality measures defined in the TSO instrument.
The Commission in turn is required to review Telecom's compliance with the TSO instrument, and notify Telecom and the
Minister of Communications in writing of any non-compliance by Telecom with the TSO instrument.
"The Commission has received Telecom's assessment," confirmed Osmond Borthwick, Network Access Manager.
"The Commission considers that the process for the measurement, reporting and auditing of the TSO service quality can
be significantly improved and will work on these issues with Telecom over the next reporting period.
"Based on the information provided by Telecom, the Commission has notified the Minister and Telecom that it has not
been demonstrated to the Commission's satisfaction that Telecom is in compliance with the TSO instrument for the period
from 20 December 2001 to 30 June 2002. Further discussions will be held between the Commission and Telecom."
Background information – Telecommunications Act 2001, Section 80 Assessment of compliance with TSO instrument,
Not later than 60 working days after the end of each financial year of a TSP, under a TSO instrument, the Commission
must - a) Assess the TSP's compliance with the TSO instrument during that financial year in accordance with
any process set out in the TSO instrument; and b) Notify the TSP and the Minister in writing of any
non-compliance by the TSP with the TSO instrument.
Section 83 Calculation of net cost and auditor's report must be given to Commission - Not later than 60 working
days after the end of each financial year of a TSP under a TSO instrument that does not contain a specified amount, the
TSP must provide to the Commission- a) calculations of the net cost of complying with the TSO instrument
during the financial year; and b) a report prepared by a qualified auditor that includes a statement of
whether or not the calculations comply with - I. any prescribed requirements relating to those
calculations; or II. if there are no prescribed requirements, any requirements of the Commission.