Keeping tabs on telcos

Not unlike the rest of the world, New Zealand’s telecommunications regulators are taking a hard look at a market that is prone to natural monopolies.The New Zealand regulatory scene is reasonably well advanced on a global scale. With the introduction of the Telecommunications Amendment Act 2006, which came into effect on December 22, 2006, the Commerce Commission was given a longer leash to instigate investigations and recommend regulatory changes to the government.Changes to the Act brought about the eventual separation of the incumbent Telecom. When Telecom was officially separated into three distinct operating groups in 2008, only a handful of other countries had gone down the same path.European regulators are looking at following a similar route to the New Zealand separation model as a way to stimulate competition and infrastructure improvements, and as a way to stimulate economic activity in the current macroeconomic environment.The government’s regulatory arm, the Commerce Commission, currently has a number of investigations and standard terms determinations on the boil.Mobile Termination RatesArguably, the most important of these is the Commission’s current undertakings into mobile termination rates – the fee the telecommunication companies charge other providers to terminate calls on their network.MTRs have been under the Commission’s microscope before, most recently in 2007, but after former ICT Minister David Cunliffe cited a conflict of interest, the matter was solved privately between Economic Development Minister Trevor Mallard, Telecom and Vodafone. The deal essentially rejected the Commission’s recommendation to regulate termination rates.Under the commercial arrangement, Telecom agreed to reduce its MTR from 20 cents per minute to 12cpm, while Vodafone agreed to reduce its rate from 20cpm to 14cpm over a five-year period.Despite the deal, the Commission is currently investigating MTRs once again. In the most recent developments, it warned Telecom and Vodafone they could face regulatory action if they did not drop their rates.Based on its benchmarking, the Commission recently offered a preliminary view that the current cost-based MTR could be as low as 7 cents for mobile-to-mobile and fixed-to-mobile termination and 1 cent for SMS. Telecom and Vodafone both refute the Commission’s benchmarking models and have publicly stated that they refuse to budge on the matter.The Commission will release a draft report soon and will make a final recommendation to the ICT Minister by the end of the year.Sub-loop unbundlingAnother important piece of work is currently being done on sub-loop unbundling, which is essentially the unbundling of Telecom’s fibre to the node or cabinetisation project. The Commission’s price determinations here will play a large part in determining which companies eventually place their kit into Telecom’s cabinets.In what is seen as a natural evolution of local loop unbundling, where competitors were given access to Telecom’s exchanges, sub-loop unbundling will play an equally important role in defining increased fixed line competition in the marketplace.Local loop unbundling has reached only a limited amount of customers, however. According to the most recent statistics from the Commission’s 2008 market monitoring report, only 25,000 lines had been unbundled, which is a tiny share of the total 915,000 broadband connections.This has been mostly due to the limited areas that have been unbundled. Exchanges in parts of Auckland and a very limited area in Wellington have so far been unbundled by Telecom’s competitors. Orcon and Vodafone are the only two players in the unbundling market, despite promises from TelstraClear that it has plans to unbundle exchanges in smaller centres around the country.Key to the sub-loop determination will be the pricing scheme. Co-location costs and backhaul pricing will influence how many players will deploy their kit into Telecom’s cabinets.The Commission is expected to make some form of announcement this month.Et alMeanwhile, there are a number of other telecommunications regulatory decisions to be discussed over the coming months.The Commission is currently considering whether to begin an investigation to deregulate some resold Telecom services. Back in 2002/2003, the Commission set regulated services for Telecom, but many of those services may have become defunct over time. The Commission recently received submissions from the industry on the matter and has yet to decide whether an investigation is appropriate.The Commission will continue to review backhaul routes to determine whether there is actual or potential competition to Telecom along particular routes. The next review will begin in July 2009.The Commission’s investigation into mobile roaming was recently deferred in light of current investigations. A decision as to whether the Commission will investigate mobile roaming  should be made around July 2009.The Commission’s long-awaited NGN study will be pursued in different work streams relating to separate issues concerning NGNs, such as open access, IP Interconnection and developing a new strategy to monitor NGNs.The Telecommunications Carriers’ Forum (TCF) was working on IP Interconnection between interested parties, but that work has ground to somewhat of a halt. The consultation will cover the process for transitioning from fixed PSTN interconnection for voice services to IP Interconnection for voice services and the introduction of IP Interconnect for VPN services. The Commission is consulting on whether a Schedule Three investigation is necessary.Changes to the Telecommunications Services Obligations (TSO) from a policy point of view, are still in the hands of the Ministry of Economic Development. There are current legal challenges related to past TSO decisions in court involving Vodafone and Telecom. The Commission will be bringing out its 2006/07 and 2007/08 TSO determinations over the next couple of months.There is, of course, continued work being done on Telecom’s accounting separation and the company’s operational separation.The Telecommunications Carriers’ ForumDuring talks on changes to the Copyright Act, namely Section 92A – which would have meant the ISPs being required to disconnect customers who were the subject of repeated copyright infringement complaints – the TCF was on high alert.Once TelstraClear pulled out of the TCF copyright code, the industry group’s code of practice was somewhat diluted.The issue has since gone onto a simmer, following the government’s decision to cancel 92A in its former format, but it has not gone away. Following a round of submissions from interested parties, the issue is firmly in the government’s court. The government is currently conducting a review into 92A.Over the coming months, the TCF will continue its review of the numbering regime jointly with the Numbering Administration Deed (NAD), the MED and the Commission.The TCF is also working on an emergency services code, among other things.In May the TCF gained a Chairman – Richard Westlake – but lost its inaugural CEO. Ralph Chivers will be leaving the Forum soon to take up the role of programme manager for the government’s fibre project. A new CEO for the TCF is expected to be named in the next couple of months.