Industry cautious on TSO announcement

Vodafone has slammed the TSO as a 'millstone around the neck of the industry'. Photo / Kenny Rodger

The Government's announcement about the reform of the Telecommunications Service Obligation (TSO) has been welcomed by telecommunications and other businesses, but they are seeking more details.

Communications and Information Technology Minister Steven Joyce yesterday announced the release of two discussion documents on the Government's rural broadband and the TSO.

The TSO levy has been in place since 2001 and involves the industry paying the levy which is paid back to compensate companies supplying service to rural customers.

Mr Joyce previously announced the Government would fund a $300 million rural broadband initiative.

He said yesterday it would be funded through a $48m direct contribution, interim funding of $52m, and the rest through a new TSO.

The new TSO will be "a more transparent contestable industry-wide mechanism that focuses on developing rural telecommunications", Mr Joyce said.

The TSO was worth $70m the changes will see that drop to $50m.

Vodafone chief executive Russell Stanners said it was time for reform of the TSO.

"The TSO regulation was introduced with the best intentions but has become a millstone around the neck of the industry."

Telecom said it had been part of an industry-wide push to secure reform of TSO arrangements.

"This reform is long overdue and needs to be based on principles of contestability, transparency and technology neutrality," Telecom chief executive Paul Reynolds said.

"It is equally important that any subsidies applied to fund services to uneconomic customers are borne equally by all consumers, and not just Telecom's."

Federated Farmers welcomed the plan but said it was approaching it cautiously until more details were known.

The federation's telecommunications spokesman Donald Aubrey said ensuring quality broadband reached New Zealand's farms and rural businesses was of the "utmost importance".

The Telecommunications Industry Group (TIG) said the plan amounted to a $252 million industry tax.

"The Government has just replaced one form of taxation with another, in an industry where prices are dropping, margins are tight and customer expectations are increasing," said TIG chief executive Rob Spray.

- NZPA