Telecom cries foul over rural levy changes

Telecom says proposed changes to the TSO will mean less investment in telecommunications for isolated areas. Photo / Derek Flynn.

Telecom is crying foul over the government's proposed changes to the levy put in place to protect rural customers when the carrier was privatised in the 1990s, saying it will lead to less investment in outlying areas.

The Telecommunications Service Obligation proposal has "a number of flawed assumptions" and is "fundamentally inconsistent with the government's own policy for good regulatory practice," according to the company's submission.

It slammed the proposal to retrospectively remove funding, saying the Ministry of Economic Development hadn't assessed the impact of doing so, and that it breached the government's own legislative guidelines.

Telecom refutes the claim it has benefited under the scheme, in which it has received about $70 million a year for providing basic phone services to non-commercially viable customers, saying "there is a real and substantial cost" to the company.

"The TSO proposal will simply make the rural areas that the Commerce Commission has already identified as uneconomic even more uneconomic," the company said in its submission. "It is likely to create significant and far-reaching problems as assets fall to be replaced in these areas in the next 10 years, but there is no incentive to make that investment."

Communications Minister Steven Joyce announced the proposal in September in tandem with his plan to roll out the rural broadband infrastructure.

The proposed TSO levy will be used raise some $300 million over the next six years to fund the high-speed internet roll-out. Telecom doubts the figure will meet policy-makers' objectives for the rural broadband initiative.

The company claims to have spent more than $115 million on its fixed line and mobile networks in rural New Zealand over the past year, and said it will spend another $30 million, annually, over the next decade on fixed line infrastructure.

The submission calls for government to modify the TSO with Telecom, and said "greater precision needs to be put around the applications of the Telecommunications Development Fund."

The fund will be used for investment in non-commercial telecommunications infrastructure, and Telecom said it should be "funded principally" by the government.

Shares in the phone company dropped 0.8 per cent to $2.52.

- BUSINESSWIRE