KEY POINTS:
MPs studying how to open Telecom's network to its competitors want tougher regulation of the company than is proposed by the unbundling bill, say sources on the select committee and in Telecom.
It is understood the committee is moving to recommend that the Telecommunications Amendment Bill include a
provision forcing Telecom to split its retail and wholesale divisions, emulating British Telecom, which is the model the Government favours.
This could result in Telecom selling network access to its competitors on similar terms to its own retail arm - by pegging its wholesale arm's profitability to the number of unbundled lines it sells to its customers.
The wholesale unit's profits would be independent from the rest of the group.
The bill is at the heart of Government plans to let competitors use Telecom's equipment and lines running to homes and businesses, and gives the Commerce Commission powers to regulate access.
Adopting the British Telecom model would go much further than the bill's proposal to expose Telecom's accounts to the public - known as accounting separation.
"The committee is looking into something that is broader than the bill argued and broader than accounting separation," said one committee member.
It is understood the committee made it clear in a meeting with Telecom last month that it would push through a British Telecom model, said a Telecom source.
The committee delayed the date on which it would report back to Parliament from early this month to December 5, saying it had been delayed by consideration of tax legislation.
Telecom chief executive Theresa Gattung told the committee in September that the company had started the process of splitting its wholesale and retail units to "try to get on" in the new regulatory environment.
The company proposed a separation model to the committee that it claimed was based on British Telecom's structure.
But opponents said it was a watered-down version with significant differences.
Telecom's profits are based on earnings from individual customers, and the wholesale unit's profits are not independent from the rest of the group.
It is understood Labour wanted to appear to be being tough with Telecom to enhance its election chances.
British Telecom voluntarily split its business under pressure from the UK communications regulator and created its wholesale business, Openreach, in January.
Telecom shares yesterday closed up 7c to $4.74.
Committee-power
* Select committees are the means by which Parliament hears evidence from interest groups and amends bills to reflect the evidence.
* The finance and expenditure select committee is probably the most important.
* It covers economic policy and management, government spending, monetary policy and tax.
* Labour MP Shane Jones chairs it and Labour has three other MPs on it. National has four members, and New Zealand First, United Future and the Greens have one each.