Free cellphones likely for rural NZ

By PAUL BRISLEN

More than 60,000 New Zealanders could be given cellphones and free local calls under proposals before the Government.

Communications Minister Paul Swain is considering farming out Telecom's legal obligation to provide free local and emergency calls for unprofitable customers in rural areas. Arch-rival Vodafone, Woosh Wireless or BCL would step into the breach.

Swain has asked his officials to examine if these companies could provide a reliable service and expects a recommendation "real soon now".

Telecom's competitors pay a share of the costs of maintaining a service for marginal customers but say they could do it for much less.

"Clearly the issue of Vodafone paying Telecom to compete in areas where Vodafone itself has spare capacity is one that needs looking at," said Swain.

Companies would be invited to bid for the right to provide service in as many as 15 marginal regions.

It is not clear how quickly the handover from Telecom would occur if Swain gave the green light.

The Commerce Commission claims 62,000 customers are not profitable. But the figure is hotly disputed by the industry. Telecom claims it services many more, while rivals say the actual figure is much less.

Telecom has already warned that any re-allocation of the service would be a complex and difficult move.

Telecom public affairs manager John Goulter said the process ran the risk of making unprofitable customers more unprofitable.

"Some customers would want to stay with Telecom and that means duplicating networks in areas that are already economically difficult."

Goulter said Telecom would expect the Government to call for submissions on the matter before making any decision.

Vodafone, which paid Telecom $12 million to cover its portion of the free service obligation, is threatening legal action if it is billed once again.

Vodafone public policy manager Roger Ellis said: "We would offer service in those areas if it were contestable and we had cell sites available, but it would depend in large part on whether we would be further penalised for driving up Telecom's costs by taking customers off them."

Eight of Telecom's competitors have to stump up for the TSO payments. At least two are trying to back out.

CallPlus has split itself into two separate companies and claims it no longer meets the criteria to be billed. Compass Communications has said its bill should be less because most of its traffic travels on TelstraClear's network rather than Telecom's.

Vodafone, which has the largest bill, has argued that it shouldn't be charged at all as it already pays Telecom an interconnection fee to connect with its network and that the bill amounts to a tax on competition.