Government dumps UFB 'holiday'

Wednesday 18th May 2011

The Government has dumped the proposed 8-1/2 year regulatory holiday for ultra-fast broadband (UFB) prices.

The holiday would be replaced with measures that would apply if the Commerce Commission regulated prices lower than those contracted, Communications and Information Technology Minister Steven Joyce said today.

The regulatory holiday was strongly criticised in some quarters. Joyce said today he had listened carefully to industry concerns.

"While I think their concerns are more theoretical than real, given that pretty much everybody has been happy with the very competitive prices announced by CFH (Crown Fibre Holdings) to date, we have been able to find an alternative solution which will give the infrastructure builders confidence to stay committed to their low capped prices, and customers' confidence that they are will continue to get the best prices over that 8-1/2 year period."

Mr Joyce said investors' contractual mechanisms would be triggered if significant changes were made to price or other key features of the UFB regime over the build period.

"Any such remedies would remain within the current government funding of $1.35 billion. They could be in the form of additional deferred repayment to the Government of the funding. These remedies are similar to those provided in other public-private partnerships.

"In making this change the Government is backing the prices negotiated by CFH, however, if the Commerce Commission believes prices should go lower at some point over the build period, government wears the risk not consumers."

The measures would not apply where there was behaviour by local fibre companies which resulted in regulatory change.

The Government will also include an "avoidance of doubt" clause in the purpose statement of the Telecommunications Act 2001, and write a Government Policy Statement, which together will make it more explicit that the Commerce Commission and the Minister must consider investment and innovation in new markets when considering price regulation.

Joyce said the changes would be introduced at the final legislative stages of the UFB bill.

While the commission's normal role under the proposed Act will now apply, the restriction on unbundling of the UFB network to residential customers will remain until January 1 2020, after which unbundling can occur.

Joyce thanked the Maori Party for its representations and assistance in developing the change.

InternetNZ welcomed the dumping of the regulatory holiday.

"The regulatory holiday proposed by the Government was one of the biggest flaws in the emerging regulatory framework for telecommunications," InternetNZ chief executive Vikram Kumar said.

"The mechanism proposed looks like a superior approach even to the special access undertakings regime we suggested to the select committee. It does not require a major re-write of the Telecommunications Act, and it can be implemented quickly.

Telecommunications Users Association of New Zealand chief executive Paul Brislen was also happy.

"We, the consumers, get full Commerce Commission oversight of the new regime to make sure we're getting the best bang for our buck," he said.

"This is fantastic news and clears the way for the development of a world-class ultrafast broadband network that will give New Zealand the opportunity to take on the world in the new digital era."

NZPA

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