Rural costs of Kiwi Share '$167m a year'

By RICHARD BRADDELL

Telecom's Kiwi Share obligation to provide telephone services to rural customers on the same terms as everyone else is costing it $167 million a year, the company says.

The loss, calculated and disclosed for the first time under rules and methodologies laid down by the Government, compares with a preliminary estimate this year of about $120 million.

Telecom said it was losing money on 30 per cent, or 380,000, of its residential customers, who individually were costing it $36.42 a month, or $437 a year.

The Kiwi Share requires Telecom to maintain local residential services at least as widely as in 1990, while preserving unlimited free local calling and ensuring that local line rentals are no higher in real terms than in 1990.

Bruce Parkes, Telecom's Government and industry relations manager, said the rural services were now provided well beyond the 1990 boundaries.

"The Kiwi Share is 10 years old this month," he said.

"There is no doubt it requires a major overhaul, particularly in light of the growth of the internet."

It would cost Telecom $500 million to upgrade its rural network to city-level internet access, but with little extra revenue in return, said Mr Parkes.

The paucity of information on the Kiwi Share's impact on Telecom's profitability has underpinned the lengthy disputes over the pricing of local interconnection with other carriers that ran through much of the past decade.

The Government's telecommunications inquiry in its preliminary report recommended that losses on the Kiwi Share should be borne where they fall.

Its final report went to the Government yesterday.

It will be made public on Wednesday.

Telecom now seems eager to provide more information on its local network, saying it is working towards "more disclosures on the financial performance of its local network as a notional business entity separate from other operations within the company."

Mr Parkes said yesterday's disclosures "provide everyone with a much better understanding of the economics involved in the local service currently provided by Telecom throughout New Zealand."

Full details, including methodologies, are available on Telecom's website, telecom.co.nz, under "Who are we."