$72m bill for rural phone service

Steven Joyce. Photo / Hawkes Bay Today

Telcos face a multimillion-dollar bill to pay for phone services to hard-to-reach rural customers.

The Commerce Commission has calculated the Telecommunications Service Obligation (TSO) for the 2007/08 year at $72.1 million and $61.4 million for the previous year.

The TSO, established in 2001, ensures basic phone and internet services to 60,000 commercially non-viable customers through an industry levy payable to Telecom.

The share of levy paid by the various telcos is apportioned according to its share of the market. Telecom is liable for 70 per cent, Vodafone 24 per cent, TelstraClear 5 per cent and the remaining 1 per cent split among the remaining customers.

Communications and IT Minister Steven Joyce last month announced a reform of the TSO that will phase it out by the middle of next year. It will be replaced by an industry levy of around $50 million per year for the next six years, which will partially fund a $300 million contestable rural broadband fund.

The TSO levy has been a sore point among the telecommunication companies since its introduction, with Vodafone particularly resentful at being forced to pay for a fixed-line network to customers it contends it could serve with its wireless network.

In August, Vodafone launched a campaign with satellite broadband provider Farmside offering a subsidised service to any customers on the "list" of commercially non-viable customers.

A spokesperson confirmed a revised offer would be released in the next two weeks to match the requirements of the Government proposal.

Vodafone is also involved in court action appealing against the TSO determinations for the 2003/04, 2004/05 and 2005/06 years, and has until early November to appeal against the latest determinations. Telecom has also appealed against the 2004/05 and 2005/06 determinations.