Regulation holiday stays in broadband law

Contractors laying fibre optic cable. Photo / Chorus

A parliamentary select committee report on the ultra-fast broadband law has left it mostly intact, despite a tide of industry opposition.

The finance and expenditure committee reported back to Parliament yesterday on the Telecommunications (TSO, Broadband, and Other Matters) Bill and recommended it become law, if several changes are made.

The bill paves the way for the Government's $1.35 billion ultra-fast broadband scheme, which plans to lay fibre internet cables across 75 per cent of New Zealand over the next 10 years.

Although proposing tweaks to the bill, the committee believed the hotly debated regulatory forbearance period should be kept in place.

This section of the law would remove the Commerce Commission's ability to regulate price on the broadband network until December 31, 2019.

The committee made its decision on advice from Crown officials that the forbearance would result in lower wholesale and retail prices "by removing the risk premium" for investors.

The logic is that if the commission cannot regulate the network, prices will remain stable and investors will have the confidence to put money into the scheme. Price caps would be put in place to ensure they cannot be raised unfairly.

Notes from a meeting between Communications Minister Steven Joyce and Labour's Clare Curran suggest that providing price certainty and removing the risk premium would lower the cost of the broadband roll-out by $400 million to $600 million.

The select committee report also recommended the commission should be unable to review the forbearance period to see if it was working until the end of 2018.

Previously, a review was allowed after 2016.

Telecommunications Users Association chief executive Paul Brislen, who spearheaded industry opposition to the "regulatory holiday", was underwhelmed by the changes the committee put forward.

"They haven't addressed any of the big concerns at all.

"They seem to be of the opinion that officials say there is no problem and that's that."

Labour and the Green Party produced minority reports and opposed removing the Commerce Commission's ability to regulate fibre, fearing it would negatively affect competition.

Labour has indicated it will repeal the bill if it returns to power in November.

The Act Party also criticised the bill and was against the Government's funding of fibre internet.

As well as facilitating the rollout of fibre, the bill also makes the necessary changes for Telecom to split its wholesale business from its retail arm, which the company proposed as part of its bid to be the Crown's private partner in the scheme.

These changes will come into law only if Telecom wins the broadband contracts and will be dropped if the company is unsuccessful.

The bill cannot go to a vote in the House until the Crown announces who it will partner with and whether Telecom will be involved.

Industry insiders have tipped that a decision will be made this week.