Web body says fibre deal may be illegal

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The Government risks riding roughshod over international obligations with plans to give investors in its ultra-fast fibre broadband network a 10-year regulatory holiday, according to an internet users advocacy group.

InternetNZ has raised concerns about the regulatory forbearance period breaching international legal commitments after seeking an opinion from Wellington public policy lawyer Michael Wigley.

In July, Minister for Communications and Information Technology Steven Joyce announced amendments to the fibre broadband scheme "to avoid burdening the infant businesses investing in emerging technologies with inappropriate regulation".

"Prices will be set by Crown Fibre Holdings through negotiations following the tender process, and there will be limited scope for regulatory intervention to alter those prices while the industry is still immature," he said.

"However, there will be safeguards in place to ensure that effective competition will develop."

Wigley said that under the World Trade Organisation's General Agreement on Trade Services (GATS), New Zealand, like other countries, must have a telecommunications regulator "separate from, and not accountable to, any supplier of basic telecommunications services. The decisions of and the procedures used by regulators shall be impartial to all market participants."

Joyce said he was well aware of the obligations under the international agreements and was confident the measures being taken were consistent with these obligations.

He said the regulatory arrangements were not a "regulatory holiday" and that fibre investors would be subject to significant regulation.

This includes pricing set by competitive tender and regulated by way of contract for the 10-year forbearance period. During this time the Commerce Commission would have significant powers to monitor and enforce compliance.

"It is important to note that the regulatory considerations that apply to next-generation networks are not always the same as those for legacy technology," said Joyce.

"The technology capabilities, investment lifecycles and business considerations are very different in the world of next-generation networks, and so we should resist the urge to simply apply legacy regulatory thinking to new technologies."

InternetNZ chief executive Vikram Kumar said the organisation was opposed to the principle of the regulatory holiday given the existence of an independent telecommunications commissioner whose specific job is to oversee these issues.

"There has got to be a persuasive reason why we would go against that."

Kumar said it was "unfair and incorrect" to ask the Government's investment vehicle, Crown Fibre Holdings, to also be the regulator.

"The Government is wearing two hats, but instead of separating those two hats into two bodies it has asked Crown Fibre Holdings to do both," he said. "Crown Fibre Holdings is clearly wearing an investor and operations hat. It's impossible for them to also be a good regulator."

Kumar said the risk was that the balance between the investor and the consumer may get tilted in favour of the Government investment.

"You can't wait for everything to be perfect so there is a bit of risk-taking going on and I think we all applaud that. Everybody wants fibre quickly. The danger is it's a complex and difficult area. I suspect the Government may not have even considered this issue that it would be illegal under their international obligations."

Kumar said the issue needed to be addressed before the first contracts were signed with potential infrastructure partners, given the difficulty of unpicking commercial contracts.

Crown Fibre Holdings spokesman Paul Clearwater said the organisation was "on track" to deliver a recommendation to the shareholding ministers.

In a release made in September, Crown Fibre Holdings chairman Simon Allen said recommendations for binding offers for initial investment partners, Alpine Energy, Central North Island Fibre Consortium and Northpower, would be made last month to commence the rollout of the fibre project before the end of the year.