CommComm draft Telecom TSO cost 08/09

Media Release - Commerce Commission releases draft Telecom TSO cost calculation for 2008/09

The Commerce Commission today released a telecommunication service obligation (TSO) Cost Calculation Determination for the Local Residential Telephone Service covering the 2008/09 year. The draft cost is $69.7 million.

The change in the corporate tax rate from 33 per cent to 30 per cent in the 2008/2009 TSO period resulted in a lower pre-tax WACC for the 2008/2009 TSO period compared to that in the 2007/2008 TSO period. This has been the major contributor to a lower TSO cost from that calculated in 2007/2008.

Under the TSO Telecom is obliged to provide certain local residential telephone services to residential customers who may not otherwise be provided with those services at an affordable price. The TSO allows Telecom to recover its costs of providing this service.

The total net cost for 2008/09 will be shared according to the final TSO Cost Allocation Determination for 2008/09 which is available on the Commission’s website. The costs will be shared amongst the following: Telecom, Vodafone, TelstraClear, WorldxChange, Compass, CallPlus, Woosh, Teamtalk, Airnet and Two Degrees Mobile and Link Telecom.

Interested parties are invited to make submissions on the 2008/09 draft TSO Cost Calculation Determination. The closing date for submissions is Friday 15 January 2009 at 5pm.

A copy of the Commission’s draft determination is available on the Commission’s website www.comcom.govt.nz under Industry Regulations/Telecommunications/ Telecommunications Service Obligations

Background

The TSO Deed for Telecom’s Local Residential Telephone Service Obligations is a TSO instrument under Part 3 of the Telecommunications Act and is the successor to the Kiwi Share. The TSO was established by the Crown to facilitate the supply of certain telecommunications services to groups of end-users within New Zealand to whom those services may not othῥrwise be supplied on a commercial basis or at an affordable price.

The Commission administers this TSO Deed by:

* monitoring compliance with the TSO Deed by Telecom;

* determining the net cost faced by Telecom of complying with the TSO instrument during the financial year in accordance with the Telecommunications Act;

* determining which companies qualify as ‘liable persons’; and

* determining the apportionment of this net cost among the liable persons and Telecom.

The ‘liable persons’ are companies whose networks are interconnected with Telecom’s PSTN and who provide telecommunications services to end-users through their public switched telephone networks (PSTN).

The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets.

ENDS

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