Government sweetens Vodafone's pill

By CHRIS BARTON

Vodafone has won concessions from the Government on ways competitors can get roaming access on its mobile network.

The changes to the Telecommunications Bill, which is awaiting its second reading, will be introduced by supplementary order paper in the next week or two.

The clauses to be altered specify how a new entrant may use Telecom's or Vodafone's mobile network to attract customers before it fully establishes its own network and how it can co-locate transmission equipment on existing cellsite towers.

Vodafone and opposition MPs were angered by surprise changes to the bill which followed late and secret representations from new mobile operator Econet, Hautaki Trust, which has rights to a chunk of 3G mobile spectrum, and Maori MPs.

Industry sources say intense counter-lobbying by Vodafone has now won concessions from Telecommunications Minister Paul Swain which will be incorporated in the Government's formal amendments to the bill.

The conditions include assessment by the telecommunications commissioner of the applicant operator's bona fides, a requirement that new entrants commit themselves to a specified wide geographical coverage and milestones against which to monitor progress towards that target and a qualification that capacity is actually available for new entrants.

Conditions on roaming agreements are commonplace in OECD countries. British regulator Oftel, for example, requires a date after which a mobile operator is no longer required to provide roaming services and rules which mean the obligation of operators to provide roaming diminishes geographically over time.

Sources also say Mr Swain has chosen the telecommunications commissioner to the Commerce Commission, and will name the successful candidate when he introduces the supplementary order paper.

There is also speculation that the bill, already several months behind schedule, may not be passed before Christmas because the Government is having difficulty getting the numbers in the House to force urgency.

Telecom is also understood to be holding intense closed-door negotiations with the minister over amendments to the Kiwi Share Obligation, which guarantees unlimited local calling.

Telecom is understood to be seeking changes to the way in which the Kiwi Share losses are calculated, plus a cap on the amount of free minutes residential users may have when connected to the internet.

Sources say it is using the negotiations to try to push through subtle changes to the bill - in particular, new clauses that alter the terms for wholesaling residential services.

The new bill does not specifically cover the Kiwi Share, but does introduce new telecommunications service obligations (TSO).

The legislation proposes a method for calculating any losses caused by fulfilling a TSO and requires the losses to be shared across all carriers in proportion to their revenue.

Telecom's latest estimate of its Kiwi Share loss caused by providing free local calls in unprofitable, mainly rural areas is $174.3 million a year.

In July the Government rejected the way Telecom calculates its losses.

"The current Telecom net [Kiwi Share] cost estimates are the outcome of a process that has significant shortcomings, which is the reason the Government decided to put a new regime in place," said Mr Swain at the time

A 1998 report, New Zealand Telecommunications: The State of Competition, commissioned by Clear, argued that the Kiwi Share imposed no cost on Telecom and that the provision of residential local access generated it yearly monopoly profits of about $116 million.

Last December, the Government reached a tentative agreement with Telecom that modest data speeds of between 9.6 kilobits per second (Kbps) and 14.4 Kbps would be included in the Kiwi Share's free-calling obligation.

Telecom also said it would spend $100 million over two years upgrading its rural network to meet those data speeds.

Sources say Telecom is keen to discuss alternative ways in which the $100 million can be spent to meet the Government's aim of broadband internet access for all New Zealanders.