Telecom rails against rural TSO proposals 

Source: ONE NewsHigh country farming

Telecom says it has "serious concerns" about the government's proposal to strip its compensation for providing rural telecommunications services.

A Telecommunications Services Obligation (TSO) levy currently in place requires the industry to pay a levy which is then used to compensate companies supplying service to rural customers.

Under a new TSO detailed in September, the government aims to create "a more transparent contestable industry-wide mechanism that focuses on developing rural telecommunications".

One of the proposals would see the government pull funding for voice services in uneconomic areas.

Telecom says this proposal alters a key component of the TSO deal it has with the government.

Telecom - the largest investor in rural telecommunications in New Zealand - says it has spent over $115 million in capital expenditure for fixed and mobile networks in rural areas in the last year.

The company plans to invest a further $300 million on fixed line services over the next decade but it says investment is unlikely without government subsidisation.

Telecom also says the proposal to retrospectively remove funding for TSO obligations it has already met is "clearly inconsistent with the government's own legislative guidelines" of improving telecommunications services in rural New Zealand.

The company says the TSO proposal makes assumptions that there is no net cost to Telecom for providing rural services when costs are "real and substantial", as backed by Commerce Commission analysis.

"The TSO proposals will simply make the rural areas that the Commerce Commission has already identified as uneconomic even more uneconomic," Telecom says.

The company says it broadly supports TSO reform and the introduction of a Telecommunications Development Fund but says the current proposals are not the way forward.

It advocates amendments to the TSO proposal and the rural broadband initiatives proposal which aims to give more than 80% of rural households and 93% of rural schools access to ultra fast broadband.

Telecom says it should be able to pitch to the Telecommunications Development Fund for capital investment funds. These would be for upgrading voice infrastructure not upgraded as part of the rural broadband initiatives.

Telecom says the government also needs to rethink the amount it has put aside for its rural broadband initiatives, saying it will likely cost $200-$300 million more than the $300 million the government has set aside.