Free local telephone calls could come under scrutiny

A service that New Zealanders have come to take for granted - free local telephone calls - are up for a rethink.

The Kiwi Share, which guarantees them, would be reviewed by National and New Zealand First if they win the government benches.

Labour pledges to keep free local calling but may review other aspects of the Kiwi Share. It looks like being one of the key issues for debate in the telecommunications sector.

It's a brave politician that has a go at the KSO and it doesn't on the face of it, look like a vote winner to scrap free local calling.

But National's telecommunications spokesman Maurice Williamson is not saying National would scrap it. However, he says it needs a serious review.

"In my view the KSO (Kiwi Share Obligation) is still the barrier to that true market. And if we want really good investment and really good competition to apply, that's an issue that's got to be looked at at least very seriously."

The KSO has three main legs. It requires Telecom to provide a telephone line to 99 per cent of the population at a charge no greater in rural areas than in urban areas; not to raise the line rental by more than the rate of inflation each year; and for local calls and dial-up internet connections to remain free.

Mr Williamson says an arrangement such as the KSO is a barrier to other players investing because it is incredibly hard to compete with free local calls. That was the feedback he was getting from other countries that had tackled the issue.

The Kiwi Share was put in place for political purposes to get the sale of Telecom accepted by the New Zealand public 16 years ago.

It was worth reviewing whether the benefits New Zealanders got from the Kiwi Share early on were outweighed now by the benefits they might get from changes to telecommunications investment patterns in New Zealand.

Asked if he was concerned that Telecom would just raise line rentals in rural areas, Mr Williamson says that would have to be looked at but new technology might provide rural communities with better services.

National will find an ally in New Zealand First on reviewing the KSO but New Zealand First's communications spokesman Brent Catchpole says the party does not want to scrap it, only review it.

Telecom has used the KSO to prevent competition in local services and has raised the spectre of higher line rentals for rural customers without it, he says.

"You have to wonder if these customers are as loss-leading as they are making out," Mr Catchpole says.

Mr Williamson was asked if the Kiwi Share was a prop for Telecom's business rather than a drag, as portrayed by Telecom, because free local calls made other telephone services, including mobile calls look expensive and uncompetitive.

That was why Telecom fought to hang on to the Kiwi Share deal and opposed others contesting it.

"I'm not going to take that position until we get some good analysis of it. But it is well and truly over time that that whole issue was looked at again," Mr Williamson says.

Labour is sticking with free local calls.

"I do want to assure the public that they will not lose their right to free local calling in the foreseeable future," Communications Minister David Cunliffe says.

But other parts of the Kiwi Share may come under scrutiny if Labour is returned to power, including whether other players will have to contribute to Telecom's Kiwi Share losses from uneconomic customers. It may consider whether the KSO should go out to competitive tender.

Labour has a clear strategy, Mr Cunliffe says. A $400 million Digital Strategy to stimulate demand for high-speed internet services and regulation through the Telecommunications Commissioner is needed to enhance competition.

Mr Williamson is up against the tag that he did nothing for 10 years in the 1990s to tackle Telecom's monopoly. That was addressed by a Labour Coalition Government with the installation of a Telecommunications Commissioner with power to regulate Telecom.

Mr Williamson maintains the telecommunications regime hasn't changed much for the players. But the industry supports the changes "so I've made it clear we wouldn't change much".

He would bring in the ability to challenge the Telecommunications Commissioner's decisions in court.

Mr Williamson is still in the camp that market forces can sort out most blockages to competition and is reluctant to regulate.

"The only time I'd look to regulating and intervening is if I could be convinced consumers would get something better as a net benefit, and remember if you take away property rights you could often be up for having to compensate someone for the removal of those."

But New Zealand First is not happy with Telecom's dominance. Unlike National, Mr Catchpole believes the telecommunications regulatory regime is not tough enough and his party would want to give the Telecommunications Commissioner more power.

United Future also has Telecom in its sights. Its telecommunications spokesman Marc Alexander says the party wants to see other companies being able to rent Telecom's network -- called unbundling of Telecom's local loop -- to address the slow take up of broadband in New Zealand and the lack of choice and the high prices of telecommunications services here.

- nzpa