In introducing the government’s review of the Telecommunications Service Obligation (TSO) last week, I was critical of politicians saying one thing and doing another.

The day after that article was written, Amy Adams, as Minister of Communications and Information Technology, proved that criticism spot on.

Second, it [the TSO] needs to ensure the availability of high speed broadband services to the remote rural minority who the RBI partners of Chorus and Vodafone have decided to not serve.
Ms Adams announced that whatever the Commerce Commission’s review of the regulated wholesale price for copper-based telecommunications services reveals, it is to be replaced with her desired prices.

Her intention to over-ride a statutory regulatory process, will have two impacts.  First is that broadband users will pay more for their copper-based services than if the Commerce Commission were allowed to do its job without political interference.  Second is that Chorus will receive an unexpected boost to their bottom line.

This move to government interference in a well-functioning regulatory process is closely related to the TSO review and so I will come back to it in next week’s Rural Connect article.

Focusing on the TSO review, it is clear that a Telecommunications Service Obligations based on the original Kiwi Share Obligations, is a solution to a problem that is no longer significant.

The original intent of the Kiwi Share Obligation was to ensure the provision of standard telephone services that were both affordable and universally available.  Despite chronic under-investment in rural telephone infrastructure in recent years, we now have a telephone service that largely provides for the needs of rural people.

So the TSO has done its job, and as we race towards a broadband-enabled society, the issues change.  Can profit-orientated companies like Chorus be trusted to provide the broadband infrastructure that this future society needs and expects?

The universal availability of advanced and affordable broadband services is seen as an important enabler of economic growth and the development of a knowledge-based economy.  And given New Zealand’s high dependence on its rural sectors for economic growth, the benefits of high speed broadband to rural New Zealand will be very significant.

The current National government recognised this when it replaced the TSO fund in 2011 with the Telecommunications Development Levy.  It set the levy amount at $50 million a year until 2016, down from the current TSO value at around $70 million per year.

That annual levy, together with a $48 million taxpayer grant, is used to fund the Rural Broadband Initiative (RBI).  The RBI will enable basic broadband service to 86% of rural households.

So given the RBI, in what way does the TSO need to be amended?

In three ways.

remote-ruralFirst, it needs to ensure the affordability of rural broadband services that at present cost seven times more than like-for-like urban broadband services.

Second, it needs to ensure the availability of high speed broadband services to the remote rural minority who the RBI partners of Chorus and Vodafone have decided to not serve.  These people number around 50,000 households.  This is the only group of telco customers who do not enjoy any protections of New Zealand’s telecommunications regulators.  As discussed earlier, it is those remote rural people who are dependent on satellite  broadband services that suffer when international satellite companies raise prices and curtail services.  And there is nothing those customers can do about it but grit their teeth and payout.

Third, it needs to address the quality of broadband services for those rural people who are dependent on mobile phone services for their fixed broadband needs.  Matters of service quality are a part of the existing TSO but they are averaged across the entire country.  As a consequence, rural people put up with services that are of inferior quality even though they may meet the averaged national standards.  This disparity needs to change.

Submissions on the TSO review close on August 20th.  Rural Connect will be making a submission to that review which will be published on next week.