Commerce Commission backs away from deregulating Spark's wholesale voice services

Thursday 22nd December 2016

The Commerce Commission has backed away from a draft view that Spark New Zealand's wholesale voice services should be deregulated, instead recommending new Telecommunications Minister Simon Bridges revisit the issue in two years.

The regulator had been considering whether there were reasonable grounds to ease Spark's regulation of local access and calling services through fixed-line networks, retail services offered through fixed networks, and bundled retail services on a fixed network. Retail service providers (RSPs) currently buy Spark's wholesale voice services to sell bundled with broadband, meaning they don't have to invest in their own infrastructure, and Spark's pricing faces regulation if the commission deems the telecommunications company's margins threaten competition.

"There are a range of alternatives in the market that allow RSPs to supply voice-only services as well as bundles of voice and broadband," Telecommunications Commissioner Stephen Gale said in a statement. "But the constraint on RSPs switching to alternatives quickly and easily may allow Spark to disrupt competition if the regulatory backstop were removed from the Act now."

In the commission's draft report, it planned to recommend deregulation with a 12-month transition period, but changed tack after submissions on that preliminary decision raised concerns about RSPs' ability to find alternatives swiftly.

"We expect the constraint on switching to diminish as RSPs enhance their capability to utilise wholesale alternatives, and, in particular, as Chorus moves to greater automation in the provisioning process for the Baseband IP services (Baseband IP and Baseband IP Extended)," the report said. "At the same time we expect incentives on Spark to agree commercial commitments to better meet RSPs' requirements for security of supply will increase, reducing RSPs' reliance on the regulatory backstop."

The regulator wasn't satisfied Spark's current commercial contracts provide enough protection to RSPs, and by keeping the backstop regulation that limits Spark's ability to take advantage of those retailers while they develop the capability to use other wholesale services.

The commission recommended Bridges revisit the matter in two years, meaning Spark won't have to wait for the scheduled five-yearly review as competition has improved, and may continue to evolve as to not need the threat of regulation.

The regulator said there was little or no benefit from immediate deregulation of the services.

(BusinessDesk)

BusinessDesk.co.nz

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