KEY POINTS:
The Commerce Commission has cut back the obligations on Telecom to service non-commercial rural markets but more radical changes are planned for the TSO (Telecommunications Services Obligations).
For many - including Telecom, which benefited from a lack of regulation in the 1990s and early 2000s - the muddled and complex TSO agreement symbolised what went wrong in the period after the sale of Telecom.
A scheme meant to help consumers became a subsidy for Telecom profits and restricted competition.
Now the hope is that a new agreement set to be unveiled in three months will clear away some of the numerous anomalies that have been created.
The initial 2004-2005 draft TSO - setting the value of Telecom providing services for non-commercial rural customers - had been assessed at $71.4 million.
The revised draft TSO, released yesterday, sees that value fall by $14.1 million to $57.3 million.
Telecom will pay 70 per cent and the remainder will be paid by the other big telcos, including Vodafone, TelstraClear and TeamTalk.
At the end of the month the commission will set out the draft figures for 2005-2006.
The archaic system that sets the payments will continue for two to three years after that.
But all eyes will be on Telecommunications Minister David Cunliffe around August when he is expected to unveil a radically amended TSO.
After 17 years of murky regulations with sometimes perverse outcomes, telcos were ambivalent about yesterday's cut in charges, coming in the dying days of the old scheme.
The Telecommunications Users Association says the TSO is "an anachronism" from the 1990s when the Government failed to keep up with regulation and contributed to the anti-competitiveness.
The TSO meant that non-Telecom telcos have to contribute about 30 per cent of the estimated costs with the remainder set aside by Telecom. But under the existing rules Telecom - while effectively being compensated for the costs of its non-commercial services - is under no obligation to actually spend the money.
It has admitted in the past that it has not spent the money it raised or even the 30 per cent paid by its competitors.
Competitors were furious as they had been subsidising Telecom profits while at the same time being cut out of rural markets that are deemed non-commercial.
TUANZ chief executive Ernie Newman says the elaborate and confusing way the scheme is constructed means the changes are unlikely to be retrospective.
Even if there are changes the commission would almost certainly have to complete the calculations for the TSO for 2005-2006, 2006-2007 and 2007-2008. Newman says even Telecom, which has benefited financially from the TSO, is now working toward change.
COUNTING COST
* The Telecommunications Services Obligations (TSO) is an agreement introduced to ensure the telco provides affordable services to non-commercial rural customers.
* It sets the value of the service Telecom provides to these customers.
* Telecom pays 70 per cent of the TSO and the other telcos pick up the rest.
* The initial 2004-2005 draft TSO had been assessed at $71.4 million.
* The revised draft TSO drops that by $14.1 million to $57.3 million.
