KEY POINTS:
Vodafone is calling for a radical overhaul of rural phone services.
Critics claim the 2001 Telecommunications Services Obligations agreement has propped up Telecom's profits. Telecom's competitors contribute 30 per cent of the $78 million fund - designed to ensure all New Zealanders have access to affordable phone services.
The Government is reviewing the TSO, formerly known as the Kiwi Share.
After seven years, Vodafone, CallPlus and other competitors say they have subsidised Telecom, and they want change.
"Telecom has made a major commercial killing as the provider of last resort for the TSO," said Ernie Newman of the Telecommunications Users Association New Zealand.
"In other words, the money that Telecom has received as subsidies of non-commercial customers has gone straight to its bottom line."
Until now Telecom has held a monopoly in rural locations and defined its obligations as providing fixed-line services.
Vodafone, which is the strongest player in the mobile phone market, wants the rules for the TSO changed to allow other technologies such as mobiles.
"The current method of providing basic phone service through a legislated private monopoly is out of date and doesn't meet the needs of the rural sector," says Vodafone's general manager of corporate affairs, Tom Chignell.
He said 70 per cent of rural areas under the TSO were covered by a Vodafone network but the company still had to pay $75.7 million over the past five years alone in levies to Telecom.
Telecom spokesman Mark Watts would not go into details about how much Telecom had actually spent on maintaining rural services, and its relationship to the $78 million a year that was the basis of its receiving levies from competitors.
"Telecom is part of an industry approach that has called for deep rethink of TSO arrangements, in recognition of profound technological and other shifts since 1990.
"The size of these [TSO] subsidies is not set by Telecom, but independently by the Commerce Commission via a longstanding process," he said.
The TSO obligations used to calculate competitors' contributions were set using theoretical estimates and did not require any oversight about the actual money that went into these services.
Newman says Telecom has been meeting the letter of the law for maintaining rural services at 1990 levels as it is required to do.
