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Fibre Watch: The $600m holiday

12 May 2011

It’s crunch time for the Government’s telco law reform package with the contentious Telecommunications Amendment Bill due to be reported back to Parliament early next week. The Finance and Expenditure Select Committee, which has been considering the bill, met behind closed doors yesterday and the buzz is the legislation will return to the house with little in the way of any changes suggested by the industry players who made submissions to the select committee.

In particular, the Government is staying staunch on the "regulatory holiday” aspects of the bill, which will exempt UFB providers from pricing scrutiny by the Commerce Commission until 2019.

Last week I criticised Labour’s underwhelming performance in Parliament when it had the opportunity to grill the Government on its telco reform strategy.

This week Labour ramped up its efforts, generating media coverage around a claim it had been told by Communications Minister Steven Joyce that the regulatory holiday provision would end up costing consumers up to $600 million. Details of Labour’s claim, along with links to the documentation put up to support it, are contained in a blog by the party’s communications spokeswoman, Clare Curran. But in Parliament yesterday, Joyce dismissed the opposition’s claims, saying Labour had "got it exactly the wrong way around”.

"The regulatory package reduces the regulatory risk for bidders so they are able to accept lower margins and, therefore, offer lower build prices and lower wholesale prices to the benefit of all users,” he said.

"Without regulatory stability and certainty for investors during the crucial build period, taxpayers and/or consumers would end up paying significantly more for ultra-fast broadband.” Joyce added that the $600 million figure was amongst "a number of figures [that] have been suggested as to what these savings will be”.

No doubt there will be more verbal sparring when the bill returns to the house next week to be rushed through under urgency. 

Whilst the Government has the numbers to ram this legislation through, labour has to some extent undermined the regulatory holiday provisions by declaring it will repeal aspects of the new law if it wins office later this year.

This means a lack of certainty for UFB providers, the remainder of whom are expected to be announced soon. 

Next week should be an interesting one for the telco sector.

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