Saturn ready to act on changes

By Brian Fallow

WELLINGTON - Proposed changes to New Zealand's competition law would remove a roadblock to Saturn Communications rolling out a residential network in competition with Telecom in Auckland and Christchurch.

Saturn has a rapidly expanding residential network carrying telephony, Internet and cable television in greater Wellington.

Its chief executive, Jack Matthews, said yesterday Saturn would not consider doing the same thing in Auckland and Christchurch at a cost of around $500 million and $200 million respectively - as long as the Commerce Act permitted Telecom to respond as it has in Wellington, by matching Saturn's prices on a street-by-street basis and no more.

"The original intent, four years ago, was to build past a minimum 500,000 homes," Mr Matthews said.

"So I don't think it is unreasonable to conclude that if circumstances change, in terms of some better certainty in the regulatory environment, that our board would take another look at expansion."

Saturn was unimpressed by a Commerce Commission decision last year that Telecom's strategy in response to its expansion did not breach the act.

Submissions closed yesterday on proposed changes to the Commerce Act that would make its key provisions on anti-competitive behaviour and on mergers and acquisitions less permissive.

Section 36 of the act prohibits a dominant firm from using that position for an anti-competitive purpose.

Saturn favours a definition of "purpose" that allows it to be inferred from the dominant firm's conduct and amends the definition of "dominant" to import the Australian concept of "a substantial degree of power in a market".

The Australian threshold is regarded a lower than dominance as the New Zealand courts have interpreted it, which in practice has led the commission to regard anything up to 70 per cent of a market as less than dominant.

"Clearly 70 per cent is too high," Mr Matthews said.

"We don't want to fundamentally change light-handed regulation. We want a more practical test which will prevent at least the most egregious anti-competitive conduct and what Telecom is doing is egregious."

The benefits to consumers and businesses were huge where, as in Wellington, there were two competing networks, Mr Matthews said.

"We believe policy should be focussed on encouraging infrastructure-based competition because where there are two networks competing with each other regulation is much less necessary."