A finalised plan to split Telecom into at least three separate divisions will ensure better and cheaper internet and phone services for most consumers, industry groups say.
Communications Minister David Cunliffe today approved Telecom's plan for a three-way split in its operations.
Telecom had been required to draft the plan after the Government decided in 2006 to reregulate aspects of the industry to boost competition and investment in broadband infrastructure.
The amended plan - legally enforceable from today by the Commerce Commission - breaks Telecom into network, wholesale and retail divisions.
Telecommunications Users Association (Tuanz) chief executive Ernie Newman said the agreement of the plan would boost competition meaning over time consumers could expect to receive better and cheaper services.
He said some of the fruits of the impending separation had already been seen, as companies acted in advance, but more was to come.
That would include a range of new services as the laying of fibre-optic cables was accelerated throughout New Zealand.
"It is much easier and more secure getting into the telecommunications market in this country from today than before this was all locked in," he told NZPA
"What it does is remove once and for all the ability of Telecom to use its monopolistic provision to stamp out competition."
InternetNZ executive director Keith Davidson said the plan appeared stronger than the version Mr Cunliffe had rejected in February.
"If Telecom follows the spirit of the approved separation plan it should provide a robust framework for the future of broadband telecommunications in New Zealand."
Mr Cunliffe said the plan would mean increased competition, better services and cheaper prices over time.
"What that means is a level playing field, more choice, lower prices and Kiwi families benefit," he told reporters.
The separation plan would also speed up Telecom's roll-out of a new-generation fibre optic network.
Under the agreement Telecom had committed to rolling out the network to 80 per cent of New Zealand households by 2012, with penalties if it failed to comply.
Mr Cunliffe said recent advances meant Telecom expected to surpass the terms of the agreement and provide 10 megabits per second speed for 84 per cent of users and 5 mbps for 89 per cent by the target date.
"So that will penetrate right into rural New Zealand."
Mr Cunliffe said he expected the plan to see Telecom benefit from increased growth in the wholesale area as more retailers entered the market.
Telecom's new network access division will be called Chorus.
Mr Cunliffe said t he deal was not the end of the road for enhanced market competition.
"Work will be ongoing in the Telecommunications Service Obligations, the broadband pathway, the Digital Strategy refresh and several other regulatory matters," he said.
Telecom would have three months to ensure its divisions had proper systems to ensure no information sharing took place.
The agreement did not preclude Telecom from selling off some of its divisions.
Telecom chief executive Paul Reynolds said the agreement marked the conclusion of a lengthy negotiation and the company had "a clear understanding of both the words and the spirit of the undertakings".
They were challenging, but achievable, and Telecom already had several large infrastructure investment projects in train, including the roll-out of its fibre network.
"Collectively these investments will deliver more choice and better products and services for telecommunications users, whether they are business or household consumers."