Media Release – 7 February 2011

“Today’s announcement that the Government is in negotiation with a Telecom/Vodafone consortium to deliver its Rural Broadband Initiative reinforces serious concerns about the future of a competitive communications market in rural areas,” says InternetNZ (Internet New Zealand Inc) Chief Executive Vikram Kumar.

He was commenting on this morning’s announcement by Steven Joyce that the Government has decided to proceed to commercial negotiations with the two telco giants to deliver a $285m improvement to rural telecommunications infrastructure.

“InternetNZ strongly supports policy to raise broadband speeds, and that is why we welcomed the Rural Broadband Initiative when it was announced,” Vikram Kumar says.

“A reasonable-sized investment in new infrastructure provided on open access terms would be of clear benefit to rural areas. But the gains that could be made from this investment may be put at risk by the legal framework that surrounds the Rural Broadband initiative, and the weakness of the open access obligations that will apply to it.

“A partnership with existing infrastructure owners makes it difficult to identify new build, continuing the problems associated with the TSO (where rural subsidies were not clearly attached to new infrastructure).

“The open access obligations that have been proposed are, like those set out for the Ultra-fast Broadband Initiative, far from strong. This will unfortunately limit retail service providers’ ability to compete with the infrastructure providers themselves, who are also the major retail providers in rural areas.

“Given that the two partners are the major infrastructure owners today, new infrastructure based competition will not emerge. This reinforces the importance of very strong open access provisions and a big role for the Commerce Commission.

“Our reading of the Telecommunications Amendment Bill currently before Parliament is that the regulatory holiday that the Government is trying to secure for urban providers could also apply to this rural scheme. The unacceptable scenario of an unregulated pairing of the country’s biggest telcos controlling New Zealand’s rural communications infrastructure thus becomes a real prospect.

"The Government will be expecting a successful conclusion to these negotiations. As soon as possible, it should take two steps that would help assure the public that their interests are being put first.

“First, the Government should clarify that the rural broadband initiative will be fully covered by the regulatory powers of the Commerce Commission under the Telecommunications Act – that is, that the regulatory holiday that is proposed for urban areas will not apply to this rural scheme.

“That is a simple way to give the public confidence that this scheme will be run to the benefit of rural customers of broadband – and not just Vodafone and Telecom themselves,” Vikram Kumar says.

“Second, the Government should assure the public that it will only sign the contracts currently under negotiation if it can be assured that the combination of open access requirements and the regulatory framework that will apply are going to work in the public interest.

“If this is not clear, the Government should exercise the right to go back to market and undertake negotiations with other prospective partners,” says Vikram Kumar.

ENDS

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