Vodafone tries to overturn payout

By CHRIS BARTON

The Telecommunications Act is again under attack, this time from Vodafone, which lodged papers in the High Court on Friday to appeal against the Commerce Commission's ruling on the Telecommunications Service Obligation (TSO).

"We think the commission has made an error in the way the costs of the TSO have been allocated," said Vodafone public policy manager Roger Ellis.

In December, the commission declared Vodafone should pay Telecom $12.4 million a year towards the cost to Telecom of servicing "commercially non-viable customers", mainly in rural areas.

Vodafone believes the method of allocating costs unfairly taxes companies that invest in competing infrastructure.

This, it says, is at odds with the prime purpose of the act, which is "to promote competition in telecommunications markets for the long-term benefit of end-users of telecommunications services".

Vodafone says rival TelstraClear, which has less of its own network infrastructure, has to pay only $3 million a year.

The allocation also reverses the commission's draft ruling in June, under which Vodafone and TelstraClear would have paid about $7 million each to the cost of the TSO.

The Telecommunications Act allows appeals against commission decisions but limits them to matters of law of an interpretative and procedural nature.

Vodafone will argue that retail revenue, rather than the "netted revenue" approach adopted, is more in keeping with the purpose of the act.

"It is not good for competition and penalises infrastructure investment," said Ellis.

The commission's network access group manager, Osmond Borthwick, said Vodafone's appeal involved the interpretation of "revenue" and it first had to get approval from the court to lodge an appeal.

That was because High Court rules dictated that such an appeal must be made within 28 working days of the decision.

That means Vodafone is about three weeks late.

Borthwick said the commission used netted revenue for cost allocation because it was more economically efficient and less distorting, particularly in allocating TSO shares for smaller companies such as CallPlus and WorldxChange.

"We took the least distorting approach available to us," he said.

Telecom's head of government and industry relations, Bruce Parkes, said the company still believed the $65.7 million allocated by the commission for the TSO was too low, but it was "getting on with life".

He said he was disappointed Telecom's competitors were not doing the same.

"We don't like spending money on lawyers. We'd rather spend it on customers and hope that our competitors would do the same," said Parkes.