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Who's Sleeping With Who Here? 16 July 2002 Edition
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Telecom has long been bitching about the cost it has to carry in order to meet its Kiwi Share obligations of providing free local calling and limiting price rises for residential rentals.

If the company is to be believed, the onerous provisions of the Kiwi Share are costing it a huge $180 million per year.

Well in their wisdom(?), the government has decided that all local telcos should be forced to share the cost of the Kiwi Share's obligations by way of a new device called the Telecommunications Service Obligation (TSO) that has been added to the Telecommunications Act.

Sounds fair doesn't it? But fair for who?

Telecom's competitors claim that they will have to pass on the extra unexpected costs they will now face -- so prices will have to rise.

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Of course Telecom themselves aren't complaining -- after all, it means they'll end up with a whole lot more cash in their coffers for no extra work. This will undoubtedly mean that residential consumers can expect to see a reduction in Telecom's monthly rental as a result, right?

Are you crazy? Telecom is extremely unlikely to pass on the benefits of this extra windfall, it will probably go straight into the company's already bulging coffers.

So let's get this straight:

Back in the early 1990s when it was privatised, Telecom agreed to commit to the obligations of the Kiwi share in the full knowledge that its sale signaled the opening of the market to competition. It's no stretch of the imagination to see that the KS was the price that Telecom had to pay to retain a monopoly on the copper which makes up the residential telephone network.

Now, because new technology and that competition has arrived, Telecom is crying like a spoilt little brat because they're left carrying the KS can while the newcomers have no similar obligations.

Readers Say
(updated hourly)
  • Re: Who's Sleeping... - Joe
  • it's not easy... - Robert
  • Have Your Say

    Can anyone else see the obvious, commonsense solution here?

    Instead of legislating so as to force Telecom's competitors to subsidise its operations, why not just say to Telecom and the KS burden: "if you can't stand the heat then get out of the kitchen."

    If Telecom finds the KS obligation simply too much of a fiscal burden then why aren't we giving them just one option: surrender ownership/monopoly of the local loop in return for the removal of the KS obligations.

    If Telecom are being honest about their motives for whining then this would solve their problems right? No more $180m per year KS-related expenses.

    Telecom's competitors would also be pleased -- they'd then be in a position to gain full and equal access to the last mile of copper thus allowing the introduction of alternative DSL services, etc.

    Most of all, consumers would be pleased. The huge increase in competition for the provision of domestic phone and internet services would likely see prices drop and service offerings improve immensely.

    Did the government take the chance call Telecom's bluff? Hell no! It simply said "don't worry, we'll force your competitors to help you out."

    My goodness, I bet there are thousands of other businesses who'd just love the government to legislate in the same manner to help them out by picking their competitors' pockets.

    Hands up all those who remember the way the last government "fixed" the electricity marketplace and the results that we've had to put up with since...

    Well get ready, the current government have just done something very similar with the telephone system. Not only can we expect higher prices but we've also missed a golden opportunity to really open up the marketplace to competition.

    So now Telecom still has ownership of the local loop *and* all the other Telcos have to subsidise it!

    Just who's sleeping with who to broker this type of deal?

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