I’ve been musing overnight on how quickly Communications Minister Steven Joyce moved yesterday to quell any prospect of axing free local calls or a possible takeover of Telecom by overseas interests and scrapping of the Kiwi Share. The possibility of those things were raised by me in a release yesterday. But they didn’t come out of my imagination, despite what Mr Joyce might say. They came from a Cabinet paper, prepared by none other than National Deputy Leader Bill English, and posted in an obscure place on the Treasury website. The paper outlined a wide ranging review across New Zealand’s regulatory framework. The review is beginning to create alarm.
The paper says (among many other things) that Treasury will lead a review of the Kiwi Share and the Telecommunications Service Obligation (TSO).
The Kiwi Share requires government approval for any shareholder to acquire more than a 10% stake in our major Telco. The TSO limits rises in phone line rentals to the rate of inflation and guarantees “free” local calls.
Now I realise that a Cabinet paper does not constitute government policy. But let me quote two paragraphs from it:
TSO: The TSO framework makes available telecommunications services for which subsidy costs are recovered through levies on the telecommunications industry. Potential improvements to the TSO framework which address contentious issues for the industry were identified in the TSO review by the previous government. Further benefits could be identified by a wider review that considers abolishing the TSO framework to eliminate costs for the telecommunications industry and increase competition.
Kiwi Share: The historical Kiwi Share requirements for ownership written into Telecom’s company constitution makes acquiring a major Telecom shareholding more difficult than acquiring a shareholding in a New Zealand public company generally. Scrapping the Kiwi Share requirements would potentially open up opportunities for capital injection into Telecom from foreign shareholders.
A couple of points. Firstly, if the government is ruling out changes to free local calls and foreign ownership caps then what else is the review about? Is it about encouraging more competition in the market so that the consumer (no matter where they live) has access to a cheaper service that is of a guaranteed quality (ie includes an emergency service and single telephone directory listing etc)? And more efficiency, transparency and contestibility. How would the TSO levy be calculated? and how would it contribute to a rural strategy?
Now there’s a question! A rural strategy. It appears this government doesn’t have one. For delivering broadband services anyway.
And if this is a fair dinkum review then wasn’t Mr Joyce pre-empting the outcome of his own government’s review by saying unequivocally yesterday that free local calls and foreign ownership restrictions will remain? Because if you read the two extracts above (from the cabinet paper) then surely those things were up for discussion.
I reckon they got spooked.
Ms Curran, I’m not sure if you are aware, but the issue of the TSO has been up for discussion for many years. As recently as 2007, the Commerce Commission, also a government agency, advocated paring back the kiwi share obligation. That was under a labour government.
It is a big leap to claim that what is in a cabinet paper is government policy.
Mr Joyce is correct. Your claim that the government was planning to scrap the TSO is scaremongering.
Clare, it’s a pity you did not make the most of this issue and allowed Joyce to kill it off so quickly and easily, and get away with calling it scaremongering. Of course, this is the word of the month for NACT, every time they are exposed trying to slip something under the radar, it’s scaremongering. And as for Tim Ellis, what planet are you on, mate? The Cabinet agreed, that make is “government policy”. You dickhead.
So Tim tell me why the Minister(s) signed the paper up to Cabinet if they didn’t want the issue raised?
Translation:
“We the Labour Party are proud to have obliterated ICT in New Zealand and will resist any and all attempts by the current government to fix it.”
Labour simply cannot abide an informed and connected populace.
Trevor, I’m a reasonable person and I found Jennifer’s personal attack offensive.
“Is it about encouraging more competition in the market so that the consumer (no matter where they live) has access to a cheaper service that is of a guaranteed quality (ie includes an emergency service and single telephone directory listing etc)?”
hahahahaha
It’s infrastructural – you cannot have increased competition without increased cost.
The TSO is a perfect example of something with good intentions that has turned into a disaster. It is a massive money maker for Telecom as competitor have to hand over millions of dollars to them. It has also prevented effective competition and worst kept prices high as the seiling of CPI increases has meant Telecom increases it by exactly CPI every year – in reality costs should be decreasing.
So please please do not scare monger over the TSO as some great good thing protecting Kiwis. Getting rid of it outright isn’t that desirable either but this is an issue that needs careful working through.
Hey David. The TSO is under review. It was under review under the previous Labour Government. That TSO review was an essential part of the (former) government’s rural broadband strategy.
How can it be scaremongering to point out what was contained as up for discussion within an important National Government Cabinet paper? What’s weird is why Steven Joyce over-reacted so emphatically and so quickly and essentially pre-empted a core part of the review! Perhaps you’d like to share your thoughts on that?
Indiana, what I find offensive is a minister of the Crown taking a paper to Cabinet with a clear course of action set out and with a clear objective, and when exposed to the public before the spin can be lined up, just lies about it and calls any opposition “scaremongering”. That’s really offensive.
Clare – when you put out a release saying “This could be the end of free local calls” (and they are not free – you pay for them in your line rental), then it is scare mongering – and it worked – the Govt then ruled out any change – and yes I think that was a wrong call – I think the TSO should be fully on the table.
Read Ernie Newman’s piece today on the TSO. Almost all consumer advocates say it is awful and anti-consumer. It will be a shame if we are stuck with it.
There are some issues where opposition is warranted and valuable. There are also some issues where you gain more kudos by not going for the cheap press release and instead being constructive – such as this one. My 2c anyway.
@ David: the release was titled: “Could this be the end of free local calls?” and was a question, not a statement. As I’ve already said, the TSO was under review under the Labour Govt. I have no objection to it being udner review, it’s what sort of review and what the intentions are that’s at issue.
And why did Steven Joyce move so quickly and emphatically to shut the discussion down and pre-empt the review outcome?
Is there any of the following you disagree with?
The Cabinet paper called for the “beginning of a regulatory review programme” which was part of the Government’s first 100 day commitments.
The review’s aim is to improve the quality of regulation which would “deliver big gains for the economy”.
It will include a provision for the immediate removal of inefficient and superfluous regulation and will also create a system for future review.
In relation to the Telecommunications Act it is tasked with considering:
* Changing or abandoning elements of the TSO;
* Whether to retain the Kiwi Share requirements;
* The application of “network operator” to provide access to land for placement of telecommunications facilities;
* Changing the regulated services framework for recognising the applications of the way prices are set
The review will cover not only telecommunications but also the Resource Management Act, climate change, building, industrial relations, overseas investment, financial markets and local government regulation.
I didn’t think it was cheap. It hit a nerve. I’m up for a wider discussion of the TSO, but also on what underlying reforms are intended.
Clare
Mr Farrar,
Tell me, if the TSO was scrapped, would you see rural phone customers (or any customer not in main center) lose their landline and have to settle for a cellphone?
Brendon – Rural phone customers won’t lose their landline if there is no TSO.
Yes, but if it wasant for the NZPO/KiwiShare/TSO they wouldnt have one in the first place.
++++++++++++
Anyway, Farrar, why not tell us what you think would happen if the TSO was scrapped?
Hi Brendon, the NZ Institute of Economic Research did some work on exactly that question. Most consumers would either see price reductions, or no change, if the Kiwi Share was abolished. After all the Kiwi Share doesn’t force Telecom to connect up new households. Since 1990 Telecom hasn’t had to connect up any new households – just keep collecting monthly line rentals from the households that were already connected to Telecom 19 years ago.
The KSO-TSO must be one of the few regulations which guarantee that consumers will face regular price increases.
Given that in general telecommunications costs have been declining it must be a nice little earner for the monopoly provider. Especially when governments agreed to also tax competitors to pay a $60million per year subsidy to Telecom for a small group of customers who’s whereabouts is a closely guarded secret. Who are they and why can’t other providers have a chance to compete to deliver service to them? Yes a thorough review of the TSO is long overdue.