Rural - Uneconomic says Telecom, Important says Vodafone

Telecom CEO Paul Reynolds says the telco has recently invested $200 million a year in rural services, despite the fact its “uneconomic” to serve rural areas.

“I welcome the need for reform for rural,” he told Telecommunications Review at the company’s AGM after being questioned on the proposed reforms to the TSO (see article earlier this week) .

“I think rural is a big issue for New Zealand,” he says. “I think its uneconomic so clearly any social tax that’s involved here has to be borne fairly by anyone – Telecom’s customers as much as other players in the market place.”

During the AGM a shareholder from Kawau Island, 45kms from Auckland, complained that the Telecom cable linking the island to the mainland was 45 years old and this meant the fixed line phone service was unreliable. She paid $1000 for satellite broadband from Farmside and could only get Vodafone mobile reception.

TR later asked Reynolds about the service. “I don’t know what the coverage from Kawau Island is from XT but there are many rural areas that only get Telecom service of course. It just depends where individual companies have their aerials and their masts. Of course nobody has any fixed line services other that Telecom in rural areas so currently we’re by far the biggest provider.”

Reynolds says as a community we need to work out ways to improve the rural service. “It’s not economic to serve the rural areas otherwise everybody would be doing it.”

One provider that has been keen to take rural customers off Telecom is Vodafone. Its CEO Russell Stanners welcomed the reform of the TS0 earlier this week.

Of the $70 million most recently collected for the TSO, Vodafone paid $18 million. Telecom paid more than Vodafone, but it was the only recipient of the funding which is supposed to go towards maintaining telephone lines in rural and remote areas in order to serve Commercially Non Viable Customers (CNVCs).

In a press release, Stanners noted that Vodafone had sought a list of CNVCs from Telecom and the Commerce Commission but was told that no list exists.

“These customers are counted as though they’re a cost to the country when in fact they’re some of the most important customers in New Zealand,” says Stanners. “The new TSO will hopefully address that situation before the industry pours yet more countless millions into a scheme that can’t name a single customer.”

In July Vodafone teamed up with Farmside to offer a $500 subsidy towards the hardware for a broadband connection to any CNVC that chose a Vodafone or Farmside service. A Vodafone spokesperson says they’ve had dozens of enquiries about the offer “but Telecom tells us there is no list of CNVCs so we’re really caught in the middle on that one.”