Telecom could still deal its way out of enforced regulation

Telecom will be able to avoid the tougher Government regulation of its phone and internet network by making deals with competitors instead, new legislation tabled yesterday in Parliament revealed.

However, Communications Minister David Cunliffe denied it was an escape clause for the company.

The Telecommunications Amendment Bill - which will unbundle the local loop - allows phone and internet providers to present a deal to the Commerce Commission that side-steps the proposed Government regulation, including unbundling the local loop, unbundled bitstream, and the introduction of naked digital subscriber line broadband services.

Clause 59 of the bill "provides access provider with an alternative mechanism to supply a service to all access seekers under a voluntary undertaking to the commission that avoids the need for regulation and that is on terms and conditions agreed between the access provider and the commission". Cunliffe said clause 59 was meant to allow the Commerce Commission to accept an undertaking from an access provider in lieu of regulation.

"Such an undertaking would be binding so there is no suggestion of it being an escape clause," said Cunliffe.

"The commission would not accept an undertaking that was not beneficial to users. Where a voluntary undertaking is binding and delivers a result to end users that is superior to a regulated outcome, there ought to be a provision for locking in such an undertaking.

"Conversely, not to have such an ability would lessen the ability of the regulatory system to be future-proofed to take account of changes in market dynamics."

Last month the Government said it would force Telecom to open its phone network to internet competitors, after Telecom failed to meet broadband targets it had agreed to.

It is also revealed in the legislation tabled yesterday that Telecom will be fined $1 million if it breaches the proposed accounting separation laws. Under the bill, Telecom has to split its wholesale and retail accounts.

Further, the commission could review local loop unbundling and all designated services every five years to see whether it should continue or not.

Vodafone regulatory manager Hayden Glass said clause 59 allowed telecommunication operators such as Vodafone, which could be faced with the potential regulation of a service, to provide the Commerce Commission with an "undertaking".

"The industry, the regulator and the minister all have a preference for commercial solutions over regulated outcomes. They are likely to be faster, easier and overall better for consumers."