In May 2001, Communications Minister Paul Swain introduced legislation to reform New Zealand's telecommunications industry. The Telecommunications Bill 2001 ("the Bill") reflects the Government's response to the Ministerial Inquiry into Telecommunications, which was conducted throughout 2000.

Compared to other countries, New Zealand's telecommunications regime has, until now, been almost under-regulated. Although competition between carriers has increased dramatically in recent years, this has not been without some hard fought battles and the incurrence of significant costs. Despite this, the Government has been cautious in its approach to suggesting changes to the existing regime. Its aim has been to limit intervention to those areas of proven market failure, ensuring that industry participants are encouraged to determine their own terms of supply via negotiation

Regulation of Designated Services and Specified Services
Under the Bill, regulation will be focused on "designated services" and "specified services". As currently drafted, "designated services" include interconnection services and local number portability. There are no "specified services". If recent press statements are anything to go by, some carriers' submissions on the Bill will be suggesting more, not less, regulation of services, such as local loop unbundling and fixed to mobile carrier pre-selection. The effect of designation is to regulate the terms of access to and (in the case of designated services) the cost of, those services.

Telecommunications Commissioner has responsibility for implementation
A new position of Telecommunications Commissioner has been created within the Commerce Commission to administer implementation of the Bill. The Telecommunications Commissioner, who must be an industry expert, acting in tandem with two other Commissioners, will make determinations on a variety of matters. Of greatest significance arethe Commissioner's abilities to:

- make recommendations to the Minister of Economic Development regarding the regulation of services, and the access and pricing principles that should be imposed regarding those services; and

- resolve disputes between parties relating to designated or specified services, where one of the parties has referred the matter to the Commissioner.

The Government's purpose of "as much market as possible and as much Government as necessary" can be seen in the way the Commissioner's decision making powers are to be exercised.
- Any recommendation, determination, or decision of the Commissioner must be for the promotion of an efficient telecommunications market.

- Parties may only seek a determination from the Commissioner in relation to a designated or specified service, if they have already made reasonable efforts to negotiate the terms for supply of those services. Consequently, the Commissioner will only step in when commercial negotiations have failed.

- The Bill sets out time frames and procedures that the Commissioner must adhere to when enforcing his or her powers, including, in certain circumstances, inviting public submissions. Where the Commissioner makes a determination relating to the supply of a service, the parties may only appeal this on points of law. In this manner, the Government has addressed specific concerns raised by the Ministerial Inquiry, that industry participants require openness, certainty, and speed of resolution of issues that arise. However, at least in relation to the issue of speed, the Government could have gone further. It may still take up to 4 months for issues to be resolved under the new process.

The new regime will be "user pays". When seeking determinations from the Commissioner, each party is responsible for its own costs, and for the costs of the Commissioner. The Commissioner can decide the proportions in which costs will be shared. Ultimately this means consumers will pay, as these cost are likely to be passed through. However, hopefully this will be offset by a more efficient market and greater competition generally.

TSO instrument - a new name for Kiwi Share?
Part 3 of the Bill sets out a new regime for "TSO instruments" or contracts between the Crown and a service provider regarding the supply of a particular telecommunication service. In brief, the TSO regime provides, on an annual basis, for:

- assessment of the relevant service provider's ("TSP's") compliance with its obligations under the TSO instrument;

- assessment of the costs of compliance and allocation of these amongst the TSP and other carriers interconnected with the TSP.

Although not specifically stated in the Bill, Telecom's Kiwi Share obligations seem the only "agreement" that could currently qualify as a TSO instrument. However, the Kiwi Share seems to be subject to preferential treatment. No TSO instrument that is contained in the constitution of a TSP, where the Crown is a shareholder, will be subject to the compliance or remedies regimes under Part 3 of the Bill. The reason for this is unclear. But you can be sure that carriers other than Telecom are likely to raise it in their submissions to Government on the Bill.

What about the Telecommunications Act 1987?
The 1987 Act will remain in place. However, certain provisions under the 1987 Act have been brought within the new Bill, particularly those relating to registration and operation as a "network operator". It is difficult to understand what benefit the Government sees from operating 2 telecommunications regimes in this way - it would be simpler to completely repeal the old Act. However, unless this is addressed during the Committee process, industry participants will need to be aware of their obligations under both pieces of legislation.


The Bill is far from perfect. However, it is a true reflection of the Government's response in December 2000 to the Ministerial Inquiry, and goes a long way to addressing many of the issues raised by the Inquiry. Overall, it should result in a more efficient, open and competitive telecommunications industry for New Zealand.


Important Facts
The Government's aim was to ensure "delivery of cost-efficient, timely and innovative telecommunication services on an ongoing, fair and equitable basis to all New Zealanders".
Paul Swain

The Commissioner's powers must be exercised for the following purpose:
"...to promote efficient telecommunications markets for the long-term benefit of end-users of telecommunications services within New Zealand by regulating the supply of certain telecommunications services to service providers."

A TSO instrument must:
- identify the group of end-users
- define the geographical area of supply
- specify the retail price for supply
- specify the standard to which the service must be supplied


This is a general summary only and should not be taken as a substitute for specific advice.

x-tech group Simpson Grierson
Web site: x-tech group Simpson Grierson

Contacts
Michael Sage, Partner, michael.sage@simpsongrierson.com
Earl Gray, Partner, earl.gray@simpsongrierson.com
Jan Kelly, Partner, jan.kelly@simpsongrierson.com

July 2001