Structural separation proposal critiqued

InternetNZ critiques structural separation proposal in cross-submission
Media release – 8 November 2010
This release is also available online at: http://tinyurl.com/2aozrw4

InternetNZ (Internet New Zealand Inc) has today released the cross-submission it lodged last Friday with the Ministry of Economic Development. This submission sets out InternetNZ’s response to issues raised in the initial submissions on the Ministry’s discussion document “Regulatory Implications of Structural Separation”.

Both submissions are available at: http://tinyurl.com/2bsvhkc

InternetNZ Chief Executive Vikram Kumar says “the opportunity to put arguments about how to make structural separation work for all New Zealanders is very important, and we are happy the Ministry chose to consult with the public.”

“There are two big decisions looming that will affect how the structural separation of Telecom could best be done in the public interest.

“The first of these decisions is whether Telecom or other parties are the main contractors to build the Ultra-fast Broadband networks The second decision is a longer term one: whether the regulatory arrangements that apply to the existing Telecom network and to the new fibre networks should be set up to spur migration to fibre, or whether they should be neutral.

“If we knew the answers to these things, and if Telecom was permitted to release the full detail of their proposal (at the discretion of Crown Fibre Holdings Ltd), we would be able to make detailed suggestions as to how the proposed model of structural separation could be improved.

“As things stand, the model chosen leaves a need for intrusive regulation of both the new Network business (Chorus 2) and of the new retail business (ServTel). This is because services with monopoly characteristics will be present in both businesses.

“Telecom’s obligation is to shareholders – to maximise value for those who own the company. However, the Government’s obligation is to secure the public interest.

“Our initial submission and the cross-submission we release today explain why the proposed model probably doesn’t meet the public interest test. I have to reiterate that the lack of visibility of precisely what is proposed, and the absence of answers to the big questions mentioned above, make it impossible for strong alternative proposals to be made. Instead, we can only analyse the model presented and point out the problems it creates.

“Telecom is currently committed to seeing through the operational separation imposed in 2008. There is no gain for Kiwi telecommunications and Internet users if that gets replaced by a structural separation model requiring heavy regulation, and providing complexities that would let Telecom’s successor companies exercise market power in a poorly-regulated way.

“A poor structural separation model would be worse for New Zealand than the existing operational separation commitments,” Vikram Kumar says.

ENDS

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