Media and Communications Minister Paul Goldsmith. Photo / Mark Mitchell
A group representing the big phone companies bristles at reforms being pushed through by Media and Communications Minister Paul Goldsmith. Liquidators in two failed crypto firms – one involving Kim Dotcom – deliver their latest reports.
Telcos and consumer advocates are at odds over elements of a series of measures pursued by Media and Communications Minister Paul Goldsmith. But they also both share some common gripes.
Goldsmith says: “The Government is progressing a suite of regulatory changes aimed at improving telecommunication services for rural communities and promoting economic growth.”
These include:
“I think it’s fair to say the industry is quite surprised by some of the detail included in the paper. In particular, the approach it takes to TSO and TDL matters,” said Paul Brislen, then head of the Telecommunications Carriers Forum (TCF) that represents telcos including Spark, Chorus, One NZ and 2degrees.
“The TSO is something of a leftover from the old days and needs to be disposed of. Having a set of standards around dial-up internet access and fax machine use is totally redundant in this day and age and expecting Chorus and Spark to maintain services based on an idea that started when Telecom was privatised is a bit ridiculous,” Brislen said.
“Likewise, the TDL is a hangover from an earlier era. We have spoken with the ministry about finding a better approach to supporting the projects they want to deliver because a levy that is as opaque and hard to manage as the TDL isn’t really fit for purpose. There’s no transparency and no ability to predict what the fee will be from year to year, making it difficult for telcos to manage.
“While the TDL is an annoyance, the industry can manage that at its current level [$12m], but if a minister were to raise the TDL to the levels we’ve seen in the past, it would pose a significant impost on telcos’ business models and would have to be passed on to customers. It would have an inflationary effect.”
Last year, Chorus proposed an extension of fibre into rural areas, using a public-private model. It suggested that raising the TDL back to $50m per year would be one way to pay for part of the project.
The levy is born proportionately, with the largest player, Spark, paying $3.5m toward the $12m TDL last year. If the levy was bumped back to $50m (the level it was at during the 2010s to help fund the Rural Broadband Initiative), Spark would have to pay around $15m.
Asked for Chorus’s latest stance, a spokeswoman said: “We’re aligned with the TCF.”
Brislen added: “I personally find it hard to believe that a National-led Government would raise levies and introduce more red tape to the New Zealand business market, so I hope common sense will prevail before any changes are made to the telco regime.”
Technology Users Association of New Zealand (Tuanz) head Craig Young said it made practical sense for a regulator to set the telco levy. That would put telecommunications on par with other industries.
The potential removal of the Telecommunications Service Obligation was a concern, especially in the context of the pending removal of regulation on rural copper lines, Young said. “It could leave some people without service.”
But the Tuanz head qualified that the TSO only applied to those who had signed up for a service before Telecom was dismembered in 2011.
Young backed Goldsmith’s plan for compulsory membership of a dispute resolution service. “We’ve been pushing for it for years,” he said.
Tuanz wanted it for all providers. The $10m threshold would see many small providers escape. But he was glad the minister “has met us halfway”.
Consumer NZ chief executive Jon Duffy said: “We think it is useful for consistency of consumer experience for telcos to be required to join a recognised dispute resolution scheme. This puts telcos on an equal footing with other major industries.
“Many consumers will not realise there are schemes out there to assist them with a dispute with their telco [the Telecommunications Dispute Resolution or TDR service]. We would see a requirement for telcos to advertise their dispute scheme as a useful addition to the requirement to join a scheme.”
Brislen said the TCF objected to the provision for providers to join any dispute service rather than the industry’s official free service, the TDR.
Duffy said: “I agree that multiple schemes can create confusion. In an ideal world, there would be a single front door for complaints, to reduce this confusion.”
Tuatahi Fibre First chief executive John Hanna said in a statement: “We applaud the Government’s announcement to remove regulatory barriers for local fibre companies to improve connectivity options for New Zealanders.
“Tuatahi have been advocating for changes to improve connectivity and support further investment since our Ultra-Fast Broadband (UFB) rollout was completed in 2019, and these changes are a welcome relief.
“Our constitution was put in place with the start of the UFB rollout in 2010 and has not been updated to reflect the ever-evolving technology landscape, nor the post-UFB regulatory framework.”
Young did question why Goldsmith’s announcement of the regulatory changes was headlined “Boosting rural connectivity and economic growth” when, in his view, it contained no major initiatives to improve rural broadband. The Ministry of Business, Innovation and Employment’s November 2023 briefing for Goldsmith’s predecessor in the portfolio, Melissa Lee, said: “Rural New Zealanders often experience connectivity services that are slower, less reliable, and more expensive than urban New Zealanders.”
“There’s some tinkering. It will help the smaller fibre companies to have regulatory alignment with Chorus. They’ve been fighting with one hand behind their backs. It will help. But won’t be a huge boost.”
Young wanted to see “more government investment and more moves to create competition – especially satellite competition”.
Goldsmith has been approached for comment.
Earlier, during a keynote speech at the Tuanz Rural Broadband Symposium, he said he was still considering several proposals, including Chorus’s proposed $2.5 billion public-private partnership (PPP) to expand fibre into rural areas. But he added he had to work within current fiscal constraints.
There was no good news for creditors in the latest liquidators’ report into Dasset, the Auckland cryptocurrency exchange that collapsed on August 15, 2023 with some $6.3m in customers’ funds unaccounted for.
In fact, in a WhatsApp support group, some fear they will now not even see any of the $600,000 in digital currency that was secured by liquidators Russell Moore and David Ruscoe, both of Grant Thornton – because the only major development in their latest six-monthly report, dated March 13, is that the pair have applied for court approval to sell some of Dasset’s digital assets to cover their costs and disbursements, which total $291,00 so far (the preferential creditors were staff owed $47,304 and Inland Revenue, owed $150,932 in PAYE and GST).
“I can’t imagine there will actually be much of anything left to distribute to users,” one member of “People Against Dasset” said.
Others held out the hope that the appreciation of Bitcoin – worth around US$25,000 ($43, 500) at the time of the collapse and now around US$85,000 – and other cryptocurrencies would help add to the pot (as it seems to have done with failed Christchurch exchange Cryptopia where, after a five-year process also administered by Moore and Ruscoe, customers are set to have all of their losses covered – albeit in the context that only only 9% of its funds were lost in the hack that precipitated its collapse).
Moore and Ruscoe continue to examine transactions in the build-up to Dasset’s collapse.
The pair also continue to work with the Serious Fraud Office (SFO), which opened an investigation in February 2024. The SFO says it doesn’t comment on live cases.
Moore and Ruscoe have not had any contact with Dasset CEO and the sole director at the time of its collapse, Stephen Macaskill, since a brief contact on day three of the liquidation.
Amateur sleuthing efforts by the People Against Dasset crew have also failed to find any trace of Macaskill.
There’s also been no progress in the liquidation of another crypto company, the Kim Dotcom-founded Bitcache.
The firm was placed in liquidation in July 2023.
Bitcache launched – or almost launched – six years before.
Dotcom said the start-up would be worth “billions” as it staged a $5m crowd-funding drive in 2016 via a Cayman Islands-based crowdfunding platform, then geared up for launch.
On January 21, 2017, just 90 minutes before the service was due to go live, Dotcom tweeted: “Sorry but there has been an unexpected hiccup. Will tell you all about it later today. Let this play out, and give me some time to update you.”
Dotcom followed with a tweet calling the problem a “roadblock” that would take “a day or two” to resolve. Its status was “top-secret”.
It never launched. Lawyer Phil Creagh – on Bitcache’s board until 2020 – applied to the High Court to have a liquidator appointed. A spokeswoman for Creagh told the Herald he was owed $231,653 in unpaid director’s fees.
The first liquidator’s report said $1.2m was owed to one secured creditor – Creagh – and three unsecured creditors: Creagh, law firm Anderson Creagh Lai (now part of Hamilton Locke) and Puai Wichman, the CEO and founder of wealth protection firm Ora Partners, which has offices in the Cook Islands. Wichman has not responded to requests for comment.
In his latest report, dated January 29, liquidator Iain Nellies says receipts so far amount to $1,659.53 – all of it via a refund for the fee on an unused patent. Nellies had limited his expenses to around the same amount.
Dotcom set up Bitcache and served as a director for its first seven months but “still had an interest in running the business”, Nellies said. It was unclear when it ceased to trade.
“A review of the company records is continuing. Issues that the liquidator is currently investigating include the trading of the company during the life of the company and various matters that have arisen during the course of the period leading up to the liquidation, including who was actually in control of the company,” Nellies says in his latest report.
Dotcom could not be reached for comment but does remain in the country, 14 years after the raid on his rented Auckland mansion.
Justice Minister Paul Goldsmith signed an order to extradite Dotcom to the United States on August 15 last year.
Dotcom, who said he was seeking a review, posted to social media that he had suffered a stroke on November 7 that was life-threatening and left him in a wheelchair.
His Megaupload co-accused, Bram van der Kolk and Matthias Ortmann, were released from prison in July last year after each serving 13 months.
In a plea deal, the US dropped its bid to extradite the pair, who would instead plead guilty in a New Zealand court to being part of a criminal group and causing loss by deception for their involvement in the illegal reproduction and distribution of copyrighted works.
In June 2023, Ortmann was sentenced to two years and seven months in prison and van der Kolk to two years and six months.
All offenders sentenced to more than two years in prison become eligible for release after serving a third of their sentences.
The fourth Megaupload accused, Finn Batato, had US charges against him dropped in 2021 after he developed terminal cancer. He died in June 2022.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
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