Ten-year ‘regulatory holiday’ quashed by ComCom after telco, political pressure

19 May 2011

According to New Zealand’s National Business Review, Communications Minister Steven Joyce has caved in to industry pressure and withdrawn the mooted ten-year ‘regulatory forbearance period’ from the Telecommunications Amendment Bill. The clause would have technically exempted the yet-to-be announced winners of Crown Fibre Holdings’ (CFH) NZD1.35 billion (USD1.06 billion) Ultra Fast Broadband (UFB) initiative from Commerce Commission scrutiny with regards to pricing. Since its announcement, the so-called ‘regulatory holiday’ has earned widespread industry criticism, with detractors claiming that in the long-term the price-freeze would lead to New Zealanders paying higher prices than other countries for high-speed broadband access.

It is believed that the Maori Party was the chief instigator behind the change in policy; the National Party needs Maori Party support in order to get the legislation passed in parliament. However rival political parties were not impressed by Joyce’s abrupt about-turn. The Labour Party, which had promised to repeal the provision if elected to power, described the announcement as ‘a massive, embarrassing back-down, forced on him by the Maori Party… a last-minute, stitched-together compromise’.

Joyce’s official statement reads: ‘Regulatory forbearance on wholesale prices for the Ultra Fast Broadband network will be replaced with contractual mechanisms that would apply if the Commerce Commission regulates prices lower than those contracted. While I think their concerns are more theoretical than real, given that pretty much everybody has been happy with the very competitive prices announced by CFH to date, we have been able to find an alternative solution which will give the infrastructure builders confidence to stay committed to their low-capped prices, and customers confidence that they are will continue to get the best prices over that eight-and-a-half year period. In making this change the government is backing the prices negotiated by CFH, however, if the Commerce Commission believes prices should go lower at some point over the build period, government wears the risk not consumers. While the Commerce Commission’s normal role under the proposed Act will now apply, the restriction on unbundling of the UFB network to residential customers will remain until 1 January 2020, after which unbundling can occur. The Maori Party has taken a consistently positive view of the importance of UFB and the Rural Broadband Initiative (RBI) in lifting economic development for Maori and all New Zealanders. They are taking a constructive approach to what will be a transforming investment for New Zealand’.

New Zealand