InternetNZ calls for major changes to broadband open access undertakings

InternetNZ (Internet New Zealand Inc) has called on Government to address major issues identified in its recent submissions on open access undertakings while it still has an opportunity to do so. InternetNZ notes there are consistent themes coming through the public submissions which need to be addressed by Government.

The Ministry of Economic Development (MED) has recently completed public consultation on the draft deeds of undertaking for open access of networks funded by the UFB and RBI initiatives. Submissions have been published online (http://www.med.govt.nz/templates/StandardSummary____46182.aspx).

InternetNZ Chief Executive Vikram Kumar says “These deeds set out the roadmap to competition in the new fibre world. If we get them right, competition will drive good prices and services for Kiwi broadband users. Open access and non-discrimination are the key enablers of competition.

“There is no need to rush the deeds process, given the UFB is already being rolled out. We recognise they are complex documents to negotiate and a lot of hard work has gone into them. However, they are not yet satisfactory.

“InternetNZ has identified three major areas where further work needs to be done.

“First, the deeds do not adequately reflect the change in the regulatory regime from ‘regulatory forbearance’ to giving the Commerce Commission a more conventional oversight role. The deeds, and possibly the contracts, continue to set out Crown Fibre Holdings as the de facto ex-ante regulator.

“Second, the deeds undermine the Telecommunications Act (‘the Act’) by seeking to redefine or interpret definitions in the Act. The deeds appear to draw definitions and clauses from the UFB contracts Local Fibre Companies and (New) Chorus have negotiated with Crown Fibre Holdings. This ‘incorporating by reference’ potentially allows the Local Fibre Companies and (New) Chorus to change the intent of the legislation through a back door. Instead, where the requirements are not sufficiently detailed by the Act or are open to interpretation, InternetNZ recommends the deeds should indicate that they will comply with Commerce Commission determinations or guidance. For example, the deeds seek to carve out certain services from the definition of non-discrimination.

“Finally, some aspects of the various deeds are inconsistent with no explanations given. For example, in regard to ‘Government Initiative Services’, the Chorus Fibre and Copper deeds seek to remove some of these services from coverage of the non-discrimination requirements . Further, there is a lack of clarity on whether Chorus currently provides ‘Grandfathered Services’ to Telecom Retail and, if it does, how they will be dealt with on a non-discriminatory basis in the future.

“Besides these issues with the deeds, increases in negotiated price caps or changes to service terms and conditions should be approved by the Commerce Commission,” Vikram Kumar says.

“While the Government and Crown Fibre Holdings have done a good job setting up Local Fibre Companies, partnering with (New) Chorus, and negotiating initial wholesale prices, control over price setting should now move to the Commerce Commission.”

InternetNZ notes a potential fish-hook in allowing Chorus to replace the copper local loop in its own areas while being permitted to retain it to compete in other areas. “We believe this is inequitable and is not in the best long-term interests of consumers,” says Vikram Kumar.

InternetNZ recognises that the requirement for the RBI deeds is largely part of the relevant contract rather than being specifically required under the Act. However, given that these deeds are undertakings, they need to comply with the Act .

“The Act requires that if an undertaking is entered into, it must provide for the service provider to achieve non-discrimination in relation to supply of relevant services. This is particularly important for vertically integrated wholesale and retail organisations which face limited competition.

“As InternetNZ has previously submitted, under the RBI, Vodafone should undertake to provide the same service at the same price to its downstream retail customers as they provide to its own retail arm.

Vikram Kumar concludes by saying “it is crucially important that the Government gets its policy settings right. There have been huge improvements made in the structure of the telecommunications sector but there are still monopolies and vertically integrated companies operating.”

“The solution to balancing corporate and public interests hasn’t changed. Only two things moderate monopoly profits and behaviour - competition and/or regulation.”

InternetNZ’s submissions are available online at http://www.internetnz.net.nz/our-work/submissions.

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