NZPA

Telco industry group seeks overhaul of TSO

Friday July 25, 12:10 PM

The arrangement that sets out the basic residential telephone service that Telecom must provide should be redesigned from the ground up, an industry group says.

It called for the telecommunications service obligation (TSO), originally part of the Kiwi Share, to be opened up to competition by allowing other companies to tender to be the TSO provider.

The industry group also favoured the TSO, now being reviewed by the Government, being paid out of taxes. It is paid through an industry levy.

Telecommunications Carriers' Forum chief executive Ralph Chivers said that at the heart of the group's recommendations to the Government was the need to redefine the TSO in forward-looking technology-neutral terms.

The competitive and technological landscape had changed significantly since the Kiwi Share was established when Telecom was privatised in 1990.

The current TSO defines a basic residential telephone service, including dial-up internet access, that Telecom must provide nationally. The obligations include an inflation-adjusted price cap and a requirement to maintain a free local-calling option.

The forum's recommendations would future-proof the TSO and ensure the most cost-effective technologies were used, Mr Chivers said.

A range of telecommunications companies, employing a range of technologies including wireless, were now in a good position to provide TSO services to more difficult to serve areas.

"We also believe that competition is already doing the job in many areas of New Zealand," he said.

"Where there are two or more providers of residential services to consumers we are seeing a range of packages and calling options some of which provide more than the current TSO requires and for a lower price. One has to question whether a formal TSO obligation is still needed in these areas."

Other key recommendations contained in the TCF's report included continuing with free-local calling in TSO areas, moving to a funding model based on general taxation, and keeping a clear separation between the TSO and any initiatives to increase the uptake of broadband.

The forum said it recognised the importance of improving the availability and quality of broadband throughout the country.

But it did not believe the TSO was the right way to address any gap in the broadband needs of rural and remote customers, certainly not while the broadband market was developing. Under its recommendations, rural and remote customers who were provided a service under the terms of the existing TSO would continue to receive a service, but the technology and service provider could change, the forum said.

It insisted it was not trying to wriggle out of the costs of providing a proper phone service to all customers, but also said that in many areas the level of competition was sufficient to roll-back many of the TSO obligations.

Ultimately the consumer paid for the TSO subsidy regardless of who appeared to be writing the cheques, the forum said.

It accepted that an industry levy remained a viable option and it would continue to support such an option if the costs remained moderate, but there were good efficiency reasons for funding the TSO out of general taxation.

The Telecommunications Users Association welcomed the recommendations, with chief executive Ernie Newman saying they would be "excellent for consumers".

"It (TSO) has actually held back the emergence of competition by not only giving Telecom a position of privilege in rural areas, but requiring other service providers to make a substantial cash payment to Telecom to subsidise its losses in those areas. This is bizarre economics," Mr Newman said.

Source: NZPA

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