Joyce stomps on bid to replace telco bill’s regulatory holiday

Communications minister Steven Joyce has dismissed a suggested change to the Telecommunications Amendment Bill, which would have replaced the legislation’s controversial 10-year “regulatory holiday” provision for Crown fibre providers.

A group opposing the bill, that includes 2degrees Call Plus/Slingshot, Consumer NZ, Federated Farmers, Internet NZ, Kordia/Orcon, TelstraClear, Tuanz and Vodafone, suggested an alternative based on the Australian  ‘special access undertaking’ (SAU) approach.

Under the bill as it stands, government-owned Crown Fibre Holdings negotiates wholesale pricing with the company that wins each region under the $1.35 billion ultrafast broadband (UFB) initiative.

That pricing, approved as part of a broader contract by cabinet, is then fixed for 10 years. (It can go down, but not up.) During this “forbearance period” or what opponents call a “regulatory holiday”, the Commerce Commission can’t weigh in on a Crown fibre winner’s pricing.

The SAU approach brings the commission back into the picture. The watchdog would be able to review and oversee pricing.

'Two pretty obvious problems'
Last night, communications minister Steven Joyce said there were “two pretty obvious problems” with the SAU proposal, as described in a letter to MPs.

I think there are two pretty obvious problems with the proposal.

Mr Joyce has pitched the regulator holiday as a pragmatic move to attract more private investment, and as a necessary move to keep prices down. The minister maintains that if it wasn’t for the forbearance period, then Crown fibre companies would “price in” the risk of Commerce Commission interference (Orcon chief executive Scott Bartlett [[[link]]] has maintained that local fibre companies are already pricing in the ‘risk’ of Labour – which has said it will “possibly repeal” the holiday -  returning to power at some time in the next decade).

No certainty
Mr Joyce built on this theme last night, saying that with SAU, “It doesn't appear that bidders would have the certainty over the price book that they are needing during the crucial build phase of the network.”

The SAU proposal’s provision for the commission to “review and approve price terms” would presumably mean the watchdog could change its view on pricing over the next eight and a half years.  “The alternative, that the commission doesn't have that ability to review the SAU once set; would mean that, in effect, the SAU is the same as regulatory forbearance on prices.”

Year's delay
The minister also maintained that submissions, cross submissions and other process related to the SAU could delay Crown fibre contracts by up to a year.

“Given that retailers have indicated their support for the [ultimately meaningless] wholesale price book as publicised, I'm not sure this adds anything except a delay in the UFB for no particular benefit.”

Labour communications spokeswoman Clare Curran said the SAU proposal was worth considering.

Where to from here?
The finance and expenditure select committee, which is wrangling The Telecommunications Amendment Bill, is due to report back to Parliament on May 16.

The committee can report the bill back unchanged or with amendments (so far Mr Joyce has only flagged one).

The timing of the legislations second reading, the committee of the whole house (during which amendments can also be made) and third reading have yet to be set.

The bill passed its first reading on an oral vote before Christmas, supported by all parties.

National faces a possible rebellion by Act over the bill, particularly from Roger Douglas and Heather Roy. (“When politics replace markets, which is what this bill does, investment projects often reduce wealth rather than enhance it,” Mr Douglas told parliament during the first reading debate).

However, the government can still muster a majority for the legislation by dint of the Maori Party falling in behind.

During the first reading, Te Tai Tonga MP Rahui Katene said her party was proud to support the bill.