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The Government will consider ordering Telecom to guarantee broadband to rural New Zealand in a review of its telecommunications service obligations.
Announcing the review yesterday, Communications Minister David Cunliffe said the Government would consider whether to expand Telecom's obligations to rural areas to include broadband and new technologies as well as free local phone calls.
The Kiwi Share, now known as the telecommunications service obligations (TSO), was set up when Telecom was privatised in 1990 and guaranteed free local calling in all regions.
Cunliffe said the review - to begin in March - would cover a number of issues related to the effectiveness of the Kiwi Share.
"We have no intention of moving away from the basic principle in the Kiwi Share of preserving free local calling for residential telephone users."
This follows a move by Telecom yesterday to increase monthly line rental charges by up to $1.85 from March.
A discussion paper to be published in the first half of this year will invite submissions from industry, user groups and other interested parties.
IDC analyst Darian Bird said it was important for the TSO to be reviewed immediately, before any other legislation is enforced.
"There's a risk that when the local loop is unbundled, less profitable rural customers will miss out on any service improvements. The TSO needs to be reviewed to prevent the technology gap widening between town and country," he said.
The Government review will investigate whether to give TSO subsidies to other internet companies, apart from Telecom, for supplying services.
Currently, Telecom and its competitors pay TSO levies in proportion to their revenues, which subsidise Telecom's service to rural, isolated communities.
The review will also look at the suitability of TSO standards in a broadband and next-generation technology environment.
Vodafone regulatory manager Hayden Glass said it had been pushing the Government for a long time to review the TSO agreement.
"It's about time this is worked out because it makes life more difficult for competitors than it needs to be."
Vodafone public affairs manager Roger Ellis said the Kiwi Share covers about 60,000 people who Telecom says are not commercially viable.
"Vodafone expects to pay around $60 million over five years to help Telecom serve these customers," said Ellis.
Telecom spokesman John Goulter said the firm welcomed the review. It believed it to be timely and would work with it in a constructive manner.
Telecom shares closed down 5c at $4.97 yesterday.
