KEY POINTS:
The Government has done its sums for the Telecommunications Service Obligation.
It has calculated that the cost of ensuring Telecom provides free local calling and the ability to provide dial-up internet access to every phone line in the country was around $150 million between 2004 and 2006.
Telecom accounts for 69 per cent of that figure.
The rest - around $46 million, will now be divided up between the various telecommunications players, who will have to write cheques to Telecom based on their share of the telecommunications market in New Zealand.
TelstraClear and Vodafone will be the biggest contributors.
And there is one of the most ludicrous aspects of our telecommunications industry - Telecom's competitors have to subsidise it's local calling services, making it incredibly difficult for them ever to gain a foothold as alternative service providers.
As the Telecommunications Users' Association points out points out: "Collectively, Telecom's competitors including Vodafone and TelstraClear are paying Telecom $66,501 every day to subsidise Telecom's supply of services to customers that cannot be served profitably over it's fixed network."
This situation has to end.
It may come at the expense of free local calling but is the price we must pay to correct the inherently anti-competitive situation that exists.
It's too bad that other operators are using technologies like mobile networks, fixed wireless broadband and satellite broadband and phone provision to try and compete with Telecom in areas where it is uneconomical to reach.
They get no subsidies and have no incentive to invest because Telecom gets an annual top-up to service its copper line network.
Industry sources have told me that Vodafone has access via its mobile network to 70 per cent of those customers Telecom deems to be uneconomical to reach.
There are supposedly tens of thousands of those customers, around 60,000 at last estimate.
But it is, of course, in Telecom's interests to talk up the numbers and difficult to independently identify the non-viable customers.
But Telecom should be forced to divulge exactly where those customers are so that competitors can tender for the contract to supply services in lieu of contributing to the TSO.
Vodafone, Woosh and Kordia-WorldxChange would no doubt be in there in a flash.
I'd rather see local calling metered and competitors able to invest in servicing their own networks than Telecom collect a tax each year to maintain the unsatisfactory status quo.
As TUANZ also points out, how can the cost of the TSO have increased 20 per cent in the over two years, when technology costs are declining and retail prices are falling?
Something is very wrong here and the current Government investigation into the TSO needs to address some of these big issues the industry has with the regime.
Until it does, the the TSO will remain a barrier to the investment in infrastructure our country so badly needs.
The cost of free calling: The 2004/05 Draft TSO cost is $71.4 million. The 2005/06 Draft TSO cost is $78.3 million.
