In something of a ‘hold-the-back-page’ turn of events, the report by the Finance and Expenditure Select Committee to New Zealand’s parliament on the Telecommunications Act Amendment Bill has recommended splitting incumbent Telecom New Zealand (TCNZ) into three. Sort of. The proposal is that TCNZ is divided into three operating units – network, retail and wholesale – with independent oversight but with ownership remaining the same. Failure to operate these three units at arms length will earn TCNZ a NZ$10mn penalty, with daily fines of NZ$500,000 for continued non-compliance. And, er…that’s it.

Nobody’s nose seems to have been put too far out of joint. TCNZ chairman Wayne Boyd said his organisation would have preferred a simpler form of operational separation – apparently the telco had lobbied for a two-way retail/wholesale split – but although the deal on the table was not ideal TCNZ would try and work with it. “We made it clear that we preferred a simpler form of operational separation which we believed was better suited to New Zealand. The Committee has gone for a more complex, three-way separation,” said Boyd. “This form of separation is more complicated and costly than we believe is necessary for New Zealand but we will work to implement it as swiftly as reasonably possible.”

Which could be read as: ‘phew, could have been much worse’.

Reaction from other New Zealand players was muted. TCNZ’s largest rival TelstraClear said the revisions to the Bill had its ‘broad support’.

The Internet Society of New Zealand (InternetNZ) said no structural separation option has been provided for in this Bill, but observed that given the will to act that had been shown, it anticipated that the Government would re-regulate for structural separation if TCNZ should fail to behave under the operational separation regime. “We believe the Bill as amended will be beneficial by encouraging competition and innovation, resulting in better options for consumers. We are also pleased that there was such broad support for the Bill,” commented InternetNZ executive director Keith Davidson.

The Telecommunications Act Amendment Bill had its first reading at the end of June. At the time Communications Minister David Cunliffe noted that the Bill was a central part of the Government’s package of measures to assist the New Zealand telecommunications sector to catch-up with leading OECD countries – thanks, apparently to insufficient competition in key sectors the country currently languishes in the bottom third of the OECD telecommunications table. The Bill implements the findings of two separate but related review processes: the telecommunications implementation review; and the more recent telecommunications stocktake.

“Before going into further detail on these reforms, it is important to understand why they needed. Effective regulation of the telecommunications sector is necessary in order to ensure that the Government’s objectives in telecommunications are met,” stated Cunliffe. “Telecommunications Act 2001 dealt with a number of key issues in the sector. However, the development of competition in the New Zealand telecommunications sector has not met expectations. Analysis has clearly shown that the government’s objectives in telecommunications would not be met under the status quo.”

Obviously it remains to be seen whether the three-way shuffle will deliver these objectives. But in any event from TCNZ’s perspective we say (with apologies to Phil Spector/Vince Poncia/Pete Andreoli and The Ronettes) : ‘best part of breaking up is when you’re not breaking up’.
John Williamson