Commerce Commission takes ‘extreme’ positions on telco rules   15 Jun 2012

Article - BusinessDesk

Commerce Commission taking ‘extreme’ positions on telco regulation

By Pattrick Smellie

June 15 (BusinessDesk) - New Zealand is gaining an international reputation for "extreme" and unpredictable regulation by its competition watchdog, the Commerce Commission, says Andrew Bascand, managing director of fund manager Harbour Asset Management.

In a submission to the telecommunications commissioner, Ross Patterson, Bascand says the commission's approach puts the success of the government's ultra-fast broadband initiative at risk, and could be a turn-off for foreign investors considering buying shares in partially privatised state-owned energy companies.

His comments follow what he describes as last month's "policy shock" of draft regulations for the unbundled copper local loop - the traditional mainstay infrastructure of the national telephone system, which fibre-optic cable will replace as ultra-fast broadband rolls out nationwide.

The government's $1.5 billion subsidy plan is intended to accelerate uptake of UFB, but the Commerce Commission's approach suggests it "has a mandate to tilt the playing field back to copper," while using a flawed benchmarking approach to regulation, Bascand said.

"Telco industry regulation needs to have a policy anchor that is consistent across a broad range of objectives involving customer outcomes, the allocation of capital, and the recognition of the benefits to society in the move to fibre that may not just be consumer-related, he said.

"Regulated returns need to have a cost of capital framework, not a benchmarking framework," said Bascand.

While releasing draft regulations for consultation was a good practice, "some market participants observe that the commission seems to take an extreme position initially on some issues."

That raised risk premiums for investors at odds with the commission's role as a "core player" in New Zealand's capital markets.

The commission's drafts appeared to adopt tactical positions "to be used as a bargaining tool with companies", or to allow it conduct "goal-seeking exercises."

Bascand said if a benchmarking approach had to be used, it would make most sense to use the agreed price for basic UFB service of $37.50 a month, since that had been "tested in the real world through a long, robust and hard-negotiated tender process" overseen by Crown Fibre Holdings.

Telecom, which split off its infrastructure unit Chorus earlier this year to participate in the UFB roll-out, won the lion's share of the UFB funding in a process that policymakers were anxious to ensure did not force pricing for copper-based serviced to fall so far that uptake of UFB stalled.

However, last month's draft decision had led Goldman Sachs to cut its forecast of UFB uptake by 10 percent, suggesting outcomes that "run entirely counter to government policy", tilting the playing field in favour of copper and forcing Chorus to accept uneconomic returns on its copper network.

However the issue was handled, the government should be aware international investors now look askance at New Zealand regulators, making them wary of investing in partially privatised assets where regulatory risk remains high, such as the electricity sector.

"The government should contemplate legislation to ensure Chorus earns an appropriate return on their entire copper network and settles this matter before they embark on talking to global investors about IPOs of the SOEs," Bascand told Patterson. "Our recommendation is to set aside the UCLL and all other copper based investigations pending the full telco sector review."

While the review was scheduled for 2016, enough evidence of UFB uptake may have emerged in time for it to be held a year earlier instead.

(BusinessDesk)

Add a comment

Bookmark and Share

News

Celebrating women’s right to vote

16 Sep 2014 News
Women’s Affairs Minister Jo Goodhew has celebrated the 121st anniversary of women’s suffrage with an event recognising... more

Eminem publishers sue New Zealand National Party

16 Sep 2014 Politics
Eight Mile Style Eminem Publishers Sue New Zealand National Party for Alleged Infringement of “Lose Yourself” ... more

Business

Greenwald posts article on NZ spying allegations

15 Sep 2014 Business News By Fiona Rotherham
Article - BusinessDesk   Greenwald posts article on spying allegations ahead of 'Moment of Truth' event By Fiona Rotherham Sept.... more

NZX questions Vista's 24% gain in past two weeks

15 Sep 2014 Business News By Suze Metherell
Sept. 15 (BusinessDesk) - Vista Group International, the cinema software and data analytics company, has been issued a please... more

Living

Pop superstar Lady Gaga using Shuttlerock's kiwi software

15 Sep 2014 Environment By Fiona Rotherham
Sept. 15 (BusinessDesk) - New Zealand visual marketing software company Shuttlerock has added Lady Gaga to its client list. While... more

German, Kiwi films big winners at Uni Shorts 2014

15 Sep 2014 Entertainment
AUCKLAND: German filmmakers dominated the awards at the third annual Uni Shorts International Student Film Festival held over the... more

Property

Auckland house sales drop in August as winter, election weigh

3 Sep 2014 Property By Paul McBeth
Sept. 3 (BusinessDesk) - Auckland house sales fell for a third month in August and the number of listings remained muted in the... more

House sales down as winter cools market - REINZ

14 Aug 2014 Property
New Zealand house sales fell in July as winter cooled the appetite of house hunters while a drop in properties selling for $400,000... more

Migration

Reserve Bank says migration impact on housing 'muted' so far

11 Sep 2014 Migration By Suze Metherell
Sept. 11 (BusinessDesk) - The Reserve Bank is keenly watching the impact New Zealand's decade-high net migration inflow is having on... more

Who's living next door to you?

20 Aug 2014 Migration
Statistics NZ puts out detailed data on different ethnic groups, down to the 108 people from the Isle of Man. Did you know there are... more

Travel

Longer Wellington runway worth 2-5 flights daily by 2060

11 Sep 2014 Travel & Tourism By Pattrick Smellie
Sept. 11 (BusinessDesk) - Plans for a $350 million runway extension for Wellington International Airport would provide the capital... more

NZ guest nights rise in July

10 Sep 2014 Travel & Tourism By Suze Metherell
NZ guest nights rise in July on school holidays, record short term visitors   Sept. 10 (BusinessDesk) - New Zealand guest... more

Sport

Last race puts ETNZ on top

15 Sep 2014 Sport
Emirates Team New Zealand Today’s pictures are here Emirates Team New Zealand has won Act 6 of the Extreme Sailing series today... more

All Blacks hold off great foes South Africa

14 Sep 2014 Rugby
In the end it was down to some belligerent and tireless defence from the All Blacks, and a couple of moments of sublime from Kieran... more

Columns

Gordon Campbell: the Greenwald/Snowden revelations aftermath

16 Sep 2014 Opinion By Gordon Campbell
  Gordon Campbell on the aftermath of the Greenwald/Snowden revelations [See correction below. link] The credibility issues... more

Gordon Campbell on the Glenn Greenwald revelations

15 Sep 2014 Opinion
Column - Gordon Campbell   Gordon Campbell on the Glenn Greenwald revelations All that hanging out with the All Blacks clearly... more

Kiwi Success

Prestigious Awards in Psychology

10 Sep 2014 People
The New Zealand Psychological Society (NZPsS) -the largest membership association for psychologists in New Zealand, offers awards... more

The duo behind NZ's hottest new label

20 Aug 2014 People
We're expecting big things from Harman Grubisa, the new label from Auckland-based friends Madeleine Harman (right) and Jessica... more

Recruitment

Paramedics in NZ jump at opportunity of London career

11 Sep 2014 Recruitment
Paramedics in New Zealand jump at opportunity of a clinical career in London Paramedics hoping for a chance to work for the... more

High dollar, hands-off Govt sends workers to dole queue

22 Aug 2014 Recruitment
The loss of up to 100 jobs at Croxley stationery in Auckland is devastating news for their families and the local Avondale... more