Carriers unhappy with late telco bill changes

By CHRIS BARTON

Last-minute changes to the Telecommunications Bill deemed necessary to strengthen competition have caught some carriers by surprise.

But others say the changes don't go far enough.

"We're certainly surprised at the Government's u-turn on national roaming," said Vodafone regulatory general manager Peter Stiffe.

The company hadn't "had exposure" to the arguments that caused the change of heart, he said.

Mr Stiffe was referring to new rules allowing competitors to use Telecom's and Vodafone's mobile networks in areas where they don't have coverage. They will also let new entrants set up their transmission equipment at existing mobile operators' cellsites, speeding up the introduction of a third mobile network.

Mr Stiffe said Vodafone had not received any requests to roam on its network or to share its cellsite towers. It already had co-location agreements with Telecom that had been worked out through an industry code.

"Why have unnecessary regulation when there isn't a problem?" he said.

Late submissions to the commerce select committee by Northelia and Hautaki Trust, and lobbying by Maori MPs, appear to have swayed the Government.

Hautaki Trust - a pan-Maori group which was given $5 million by the Government and has been reserved a chunk of third-generation radio spectrum at 5 per cent discount - told the committee it was "extremely disappointed by the bill".

Bill Osborne, Brian Lees and Paul Majurey of Hautaki Trust made their submission in concert with telecoms adviser Simon Edwards - understood to be a director of Econet Wireless New Zealand - and "special adviser" Tex Edwards.

They said they were expecting a "backstop regulatory capability that could quickly swing into play if our interests were being jeopardised by unreasonable actions by the incumbents".

The Hautaki Trust was alarmed that the bill's mechanisms for activating the backstop for resolving disputes - a ruling from the Telecommunications Commissioner - would take until January 2003. It argued the only way to prevent this delay was for the Government to mandate roaming and co-location.

The submission was backed by Northelia submitters Tex Edwards and Soshana Max, with former Secretary for Justice Colin Keating, who is now with the legal firm Chen Palmer and Partners.

Northelia paid about $10.2 million for 10MHz of frequencies suitable for next-generation mobile services in the Government's radio spectrum auction. The former owner, Stuart Beadle, sold Northelia in February to a mystery overseas buyer believed to be London-based Econet Wireless.

Communications Minister Paul Swain said the Government wanted to build a more competitive telecommunications framework and provide consumer choice. "If possible we'd like to see a third mobile network in New Zealand," he said.

The bill will regulate co-location and roaming as "specified services" with a new fast-track provision of 60 days to resolve disputes. The changes will be introduced by supplementary order paper because an even split along party lines stopped select committee members reaching agreement.

The move was applauded by the Telecommunications Users Association (TUANZ), which said it would greatly improve the chances of a third cellular operator coming into the market and "thus bringing down the price of cellphone calls, which at present are relatively high".

Telecommunications analysts estimate the cost of building a new mobile network in New Zealand is about $300 million.

And they say that even with existing cellsite co-location, Resource Management Act issues could arise - such as when the height of a tower needs to be increased.

One change to the bill welcomed by Clear and Telstra is the inclusion of residential line rentals in new wholesaling regulations.

This means that for the first time, residential users will be able to get a single bill for all their telecommunications services from companies such as Clear and Telstra.

Committee chairman David Cunliffe said in the absence of local loop unbundling - the removal of Telecom's monopoly on home lines - a rigorous wholesaling and interconnection regime was required.

Telstra was disappointed the wholesaling provisions of the bill focused too much on retail services. "That's not where the real competitive benefits are because everyone simply rebrands and resells Telecom services," said Telstra industry regulatory manager Peter Alsop.

Telstra had wanted the Government to force wholesaling of discrete network elements and not just retail services. That would have seen elements such as "data-tails" - leased line links between businesses and local exchanges; and "stutter-tone" - the sound indicating a voicemail message on a Call Minder service - wholesaled to carriers. The telcos would then be able to create their own bundle of services using the wholesaled network elements and their own technology.

Mr Cunliffe said the issue of component wholesaling was a close call. The committee was advised that component wholesaling would drop prices and stimulate innovation in value-added services, but that it may be difficult to implement in practice. As a result it deferred regulation and recommended a review of the issue within 24 months.

Clear and Telstra had been concerned that Telecom would continue to retail some of its services cheaper than the wholesale rates it was providing to carriers. The committee has allayed some of these fears by amending the wholesaling regime so that an access provider is not entitled to recover any economic rents associated with its retail operation.

It has also adopted a "retail price minus avoided costs saved" principle for working out wholesale costs of retail services such as Telecom's Jetstream.

For interconnection agreements, the bill outlaws the "Baumol-Willig" pricing rule which was the basis of previous interconnection agreements with Telecom.

The rule provoked a bitter 1994 legal dispute between Clear and Telecom.

In its place is the equally mystifying "TSLRIC" cost-based pricing system.