Joyce scraps regulatory holiday from broadband bill

Communications and Information Technology Minister Steven Joyce File photo

Communications Minister Steven Joyce has scrapped the regulatory holiday companies who won contracts for the Government's Ultra Fast Broadband plan were to enjoy, just days after the policy was endorsed by select committee.

Labour says the the decision is a masssive backdown from a policy which has been bitterly opposed by itself, and many telecommunications companies.

Joyce this morning said regulatory forbearance on wholesale prices for the ultra-fast broadband network were to be replaced with contractual mechanisms that would apply if the Commerce Commission regulated prices lower than those contracted.

Regulatory forbearance meant the companies that won contracts for the Governments $1.5 billion ultrafast broadband programme were essentially free from having the prices they charged regulated by the Commerce Commission for the first eight and a half years of the new network's operation.

Joyce said he had listened to industry concerns about the plan, and while he believed they were more theoretical than real, "we have been able to find an alternative solution which will give the infrastructure builders confidence to stay committed to their low capped prices, and customers confidence that they are will continue to get the best prices over that 8-1/2 year period".

Joyce said the contractual mechanisms would be triggered if significant changes are made to prices or other key features of the UFB regime during the period the network was being built.

"Any such remedies would remain within the current government funding of $1.35 billion. They could be in the form of additional deferred repayment to the government of the funding.

These remedies are similar to those provided in other public-private partnerships.

Joyce this morning thanked the Maori Party "for their representations and assistance in developing the change".

Labour communications spokeswoman Clare Curran said the decision was "a massive backdown" by the government and looked like it had been forced on him by the Maori party."

However Curran said the new regulatory framework actually looked worse than what it was replacing.

While it allowed the Commerce Commission to have a role in regulating UFB services, if the commission found prices were too high, taxpayer money would be used to compensate the UFB companies for any reduction forced on them.

The Telecommunications (TSO, Broadband, and Other Matters) Bill, which paves the way for government plans to lay fibre internet cables across 75 per cent of New Zealand over the next 10 years, was reported back to Parliament on Monday.

The finance and expenditure committee recommended it become law, with a few minor tweaks but with the plan for the regulatory holiday intact.

The committee made its decision on advice from Crown officials that the forbearance would result in lower wholesale and retail prices "by removing the risk premium" for investors looking to participate in the plan.

The logic was that if the commission could not regulate the network, prices would remain stable and investors would have the confidence to put money into the scheme. Price caps would be put in place to ensure they cannot be raised unfairly.