Commission to look at deregulating Spark’s resale services

Issued 30 June 2016
Release No. 139

Commission to investigate deregulating Spark’s resale services

The Commerce Commission has completed its five yearly review of Schedule 1 of the Telecommunications Act 2001 and confirmed it will investigate whether Spark’s resale voice services should be deregulated.

Spark’s resale voice services have enabled retail service providers (RSPs) to offer retail fixed-line phone services without having to invest in their own infrastructure. These resale services were originally introduced with the Act in 2001 and were subsequently amended in 2011.

Telecommunications Commissioner Dr Stephen Gale said the Commission considered it was appropriate to take a closer look at deregulation of Spark’s services in light of emerging competition from other wholesale alternatives.

“As signalled in our draft decision, we believe Spark faces increased competition from other wholesale alternatives such as ultra-fast broadband and Chorus’ baseband services, which enable RSPs to provide retail voice services to consumers. Having considered submissions, in our view the time is right to investigate deregulation further,” Dr Gale said.

As part of the investigation process, the Commission will publish a draft report and consult with the industry before making a recommendation to the Minister.

The Commission has decided not to investigate whether any other services listed in Schedule 1 should be deregulated at this time.

“The other regulated services listed in Schedule 1 remain important wholesale inputs that support the supply of vibrant and competitive retail voice and broadband services. We don’t consider there are reasonable grounds to consider moving to deregulation of these services at this time,” Dr Gale said.

“We do however intend to monitor the provision of backhaul services. We recognise that the provision of backhaul services has evolved considerably in the years since they were regulated. A number of issues relating to competition and the current service descriptions have been raised in submissions during the current process. We expect to produce an issues paper towards the end of this year to obtain further information and industry views on this matter.”

The full paper detailing the reasons for the Commission’s final decision will be published online onTuesday 5 July.

Background
Schedule 1 of the Act contains the regulated wholesale services. The Commission has reviewed 14 of the 16 services contained in Schedule 1. Each of the wholesale services that are the subject of this review is used by RSPs to supply the most common retail telecommunications services to end-users. As markets evolve, new retail services are developed and wholesale service providers can face increased competition, to an extent that it may no longer be necessary to mandate access to a service through Schedule 1. As a result we are required to periodically consider whether there are reasonable grounds for commencing an investigation into whether to omit each wholesale service from Schedule 1.

The Commission reviews each service every five years by assessing whether competition may have developed to such an extent that continued regulation is no longer needed to promote competition in telecommunications markets for the long-term benefit of end-users.

We published our draft decision on 29 April 2016, and invited submissions from interested parties. Having considered submissions received on our draft report, we reached our final decision for each of the services in Schedule 1 considered under this review.

The three resale services in Schedule 1 of the Act that we consider there are reasonable grounds to investigate removing are:

• local access and calling service offered by means of fixed telecommunications network

• retail services offered by means of a fixed telecommunications network

• retail services offered by means of a fixed telecommunications network as part of a bundle of retail services.
•
The services that we consider should remain in Schedule 1 of the Act are:

• interconnection with a fixed public switched telephone network

• Chorus’ unbundled bitstream access (UBA)

• Chorus’ UBA backhaul

• Chorus’ unbundled copper local loop (UCLL)

• Chorus’ UCLL network co-location

• Chorus’ UCLL network backhaul (distribution cabinet to telephone exchange)

• Chorus’ UCLL network backhaul (telephone exchange to interconnect point)

• Chorus’ unbundled copper low frequency service
• local telephone number portability service

• cellular telephone number portability service

• co-location on cellular mobile transmission sites.

Likely issues to be considered further for backhaul services
Backhaul services provide connectivity between Chorus’ exchanges and cabinets and the RSPs’ networks. Although the Commission has decided not to investigate whether the backhaul services should be removed from Schedule 1, a separate process will be undertaken to monitor backhaul services under section 9A of the Act. As part of this process we will consider the provision of regulated and unregulated domestic backhaul services. We will seek to identify whether there might be any emerging competition issues, or issues related to the current standard terms determinations that need to be addressed.

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