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Joyce backs down from UFB regulatory holiday - Updated

18 May 2011

In light of wide-spread criticism of the government's proposed regulatory holiday on wholesale prices under the Ultra Fast Broadband (UFB) initiative, Minister for Communications and Information Technology Steven Joyce has announced contractual mechanisms to replace the provisions.

The regulatory forbearance would have exempted Crown fibre contract providers from Commerce Commission regulation until 2020.

Critics accused the Bill of favouring Telecom's shareholders over the public, while TelstraClear has been particularly vocal in its opposition to the regulatory holiday, saying the clause is "likely to rob New Zealanders of choice and trap consumers into a decade of unregulated, high-priced broadband services".

The Minister said he considered the criticisms "more theoretical than real" but announced the alternative solution with thanks to the input of the Maori Party.

Joyce said the contractual mechanisms would be triggered "if significant changes are made to price or other key features of the UFB regime over the build period."

"In making this change the government is backing the prices negotiated by CFH (Crown Fibre Holdings), however, if the Commerce Commission believes prices should go lower at some point over the build period, government wears the risk not consumers," said Joyce.

According to a Ministerial release, an 'avoidance of doubt' clause will be included in the purpose statement of the Act, together with a policy statement, to make it explicit that the Commission and Minister must "consider investment and innovation in new markets when considering price regulation".

Update: InternetNZ, which yesterday said the regulatory holiday was part of "major flaws" in the Telco Bill, have welcomed today's reversal of position from Joyce.

"The mechanism proposed looks like a superior approach even to the special access undertakings regime we suggested to the Select Committee. It does not require a major re-write of the Telecommunications Act, and it can be implemented quickly," said InternetNZ chief executive Vikram Kumar.

"The mechanism leaves the Commission with full regulatory oversight of UFB, and turns the initiative into a more conventional Public-Private Partnership approach – which arguably would have been the best way to proceed from the beginning."

Kumar noted that while problems remain with the legislation, "today's change is however, a major improvement."

Expect reactions throughout the day from TelstraClear and other opponents.

Update 2: Telco industry organisation TUANZ is understandably pleased at this result. Chief executive Paul Brislen released a statement today, which called the regulatory holiday replacement "fantastic news". Brislen singled out the Maori Party for kudos and said the solution clears the way for development of a world-class UFB network and is to be commended.