How much the telcos contribute depends on their telecommunications revenue.
How much the telcos contribute depends on their telecommunications revenue.
The Commerce Commission has just released its final determination of what share each telco will have to pay towards the $10 million annual Telecommunications Development Levy (TDL). The tax helps pay for rural broadband rollouts, services for the hearing-impaired and the 111 system.
The levy is no longer the thumpingit once was. Between 2011 and 2020 - the peak years of public-private broadband rollouts - $50m a year was collected from the industry.
Spark’s share of the levy, for example, was $17.4m in 2020 but is now just $3.4m.
Downsizing the levy has taken the heat out of the annual argument - and, often, High Court battles - over what percentage of each firm’s revenue qualified as “telecommunications” revenue, and what share each firm had to pay. The levy is proportional, so Spark as the largest player, has to chip in the largest amount.
Regardless, the final list for the year to June 30, 2022 still serves as an interesting who’s-who pecking order.
It emphasises the dominance of the big players. Spark (with $1.47 billion in qualifying revenue) , Vodafone ($1.3b), Chorus $878m and 2degrees ($477m) will collectively pay 87 per cent of this year’s levy.
The four will likely be even more dominant next year, because 2degrees and Orcon ($125m) merged just as the new financial period began.
But it also shows the rise of Sky TV, which reported 17,975 subscribers for its new-ish Sky broadband service in FY2022, up from 1930 in FY2021.todd Corp is on the list because it owns Nova.
And the modest but increasing presence of power companies that bundle broadband - which, beyond the obvious suspects in the table, include Now NZ, 48 per cent owned by Mercury. (Todd Corp is on the list because it owns Nova).
This segment will become more interesting next year too, with an incursion from the other direction: 2degrees has just launched into the power market. Orcon, which bought a small power retailer called Switch Utilities, had about 40,000 customers bundling electricity with broadband when it merged with 2degrees. The merged firm has just announced bundled power plans for its 345,000 landline broadband customers, with some kind of bundling option expected to follow for its 1.54 million mobile customers.
It will be interesting whether Elon Musk’s Starlink will be included in the levy for 2023. Indications are that, with 10,000 customers and counting, and six ground stations in NZ, it will likely top $20m in NZ revenue for the period - but as an international player with a tax-averse CEO, it could prove a thorny one for regulators.
The levy was originally supposed to be scaled back from $50m to $10m in 2017, but the then-National Government extended it for another couple of years at the higher level to help pay for an extension of the Rural Broadband Initiative (RBI) - which was something of a money-go-round for Spark, Vodafone and 2degrees, who formed the joint venture Rural Connective Group that was awarded RBI funding.
Elon Musk, owner of Starlink - which delivers broadband via satellite. Photo / Getty Images
With many in the rural community still complaining about poor internet, the Government earlier this year announced $60m for a “rural capacity upgrade”, with the new money largely drawn from the Covid relief funds. Vodafone, Spark and a series of smaller regional ISPs have gained contracts under this initiative - and Starlink could potentially be in the mix with a new $2000 grant to get remote properties connected.
A quid-pro-quo arrangement for 5G spectrum will be another source of funding
The 5G auction - which had been set to raise hundreds of millions - was recently abandoned in favour of a scheme that will see Spark, Vodafone and 2degrees given spectrum for free in return for pledges to improve mobile and broadband coverage in provincial and rural areas.
Spark has already said it will allocate another $24m to the Rural Connectivity Group (its rural joint venture with Vodafone and 2degrees) between 2023-2025. The full details of what areas will get better coverage, and when, will be hammered out over the next few months, Communications Minister David Clark said.
