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ComCom ordered to reconsider TSO

08 Apr 2010

The Commerce Commission has been ordered by the High Court to reconsider the way it calculates the amount telcos must pay to enable a rural telephony service.

The Telecommunications Service Obligation (TSO), formerly known as the KiwiShare, is effectively a levy imposed on all telcos. The money is then handed over to Telecom as compensation for providing uneconomic rural users with a telephone service at the same price as urban users.

The government is planning to change the TSO so that it becomes a contestable fund that will be invested in a nationwide rural broadband network. But in the meantime the Commerce Commission is charged each year with working out how much each telco provider owes, with the heaviest cost burden falling – after Telecom – to Vodafone.

Consequently Vodafone has been among the loudest opponents of the TSO and isclaiming today’s High Court judgement as a victory. Judge Winkelman ruled on 1 April that the Commission made an “error of law” in it assessment of the cost of providing the TSO for the years 2004/2005 and 2005/2006.

Vodafone GM of Corporate Affairs Tom Chignell says the decision could have wider consequences.

“The ball is now in the Commerce Commission’s court. It will have to review its approach to cost modelling not only for these determinations but potentially for all of the other TSO determinations as well.”

The Commerce Commission wasn’t commenting today beyond saying they were reviewing the judgement, but they did forward Telecommunications Review the following summary of TSO proceedings - which illustrates how fraught the TSO has become.


27 March 2007 - Commerce Commission decision on TSO levy for 2003/2004 financial year

23 April 2007 - Vodafone appeals to High Court

26-28 November 2007 - High Court hearing of Vodafone's appeal

18 December 2007 - High Court dismisses appeal

5 February 2008 - Vodafone appeals against High Court Decision

10/11 February 2009 - Court of Appeal hears Vodafone's appeal and reserves judgment

2 December 2010 - Court of Appeal dismisses appeal

30 March 2010 - Supreme Court allows Vodafone's application for leave to appeal

Hearing likely to be in mid 2010.

2004/5 and 2005/6

10 September 2008 - Commerce Commission Decision on TSO levy for 2004/2005 financial year

17 September 2008 - Commerce Commission Decision on TSO levy for 2005/2006 financial year

3 October 2008 - Vodafone appeals 04/05 and 05/06 decisions

6 October 2008 - Telecom appeals 04/05 and 05/06 decisions

10-14 August 2009 - High Court hearing of Vodafone and Telecom's appeals, judgment reserved

1 April 2010 - High Court allows Vodafone's appeals but dismisses Telecom's

2006/7 and 2007/8

7 October 2009  - Commerce Commission Decisions  on TSO levy for 2006/2007 and 2007/2008 financial years

18 October 2009 - Vodafone appeals 06/07 and 07/08 decisions

29 October 2009 - Telecom appeals 06/07 and 07/08 decisions

Hearing set down for March 2011


4 December 2009 - Commerce Commission Draft Decision on TSO levy for 2008/2009 financial year