Key Points:

The Government has stuck to its guns and forced Telecom to split into three separate operational units.

Communications Minister David Cunliffe said today the original plan for Telecom to split into wholesale, retail and network divisions would go ahead, creating a more level playing field for competitors wanting access to Telecom's network.

He also said that no informal deal had been struck with the Government for Telecom to sell its fixed-line telephone network, valued at $2 billion to $3 billion.

Mr Cunliffe told reporters in Auckland today that customers should get a broader range of services from a range of providers.

"What is new from now on is that those providers will be able to get the services wholesale from Telecom on a fair, even and non-discriminatory basis," he said.

"That means cheaper on exactly the same terms and conditions that Telecom supplies to its own downstream divisions.

"So Telecom could not give a second-class service to a competitor and a first-class service to its own retail divisions. They must be the same, so a level playing field is now a requirement."

Few changes have been made to the Government proposal put out for public submission in April this year.

Some amendments have been made to improve the efficacy of separation and to provide positive incentives to upgrade the network, with appropriate safeguards, he said.

"What that means is that there's a very strong incentive for Telecom to quickly improve its network and lay down those new likely fibre-based services.

"That will mean, in short, to the consumer, sooner than otherwise would have been the case, greater speeds, more reliable, 21st century networks probably based on fibre coming closer to the consumer."

An Independent Oversight Group (IOG) would be set up to monitor the split.

The separation of Telecom would take place by March 31 and Telecom had 20 working days to prepare a draft separation plan.

The determination is based on the reform of British Telecom, though Mr Cunliffe said it was "approximately half the time that it took the Brits to do the same job".

He said Telecom's incoming chief executive Paul Reynolds, who was involved in the British Telecom restructuring, had been extremely good to deal with.

"I don't think it's appropriate for me to comment on internal management matters at Telecom, but I would say that I'm very pleased with the level of co-operation that the Government's received in the framing of this document.

"Speaking personally, the interactions I've had with the incoming CEO have been excellent."

Incentives for Telecom to upgrade its network should also help internet speed and capacity, he said.

"New Zealand is not only in keep-up mode, but it's very much in catch-up mode.

"The Government regards this as an essential piece of infrastructure for New Zealand. You cannot have a knowledge economy without a knowledge infrastructure and we need to be world-class."

Mr Cunliffe insisted a Dominion Post newspaper story today saying a deal had been struck with the Government for Telecom to sell its fixed-line telephone network was incorrect, but the door was open for it to be considered in the future.

"That's a matter for Telecom. It's clear that under the Act the Government has no power to require a structural split," he said.

"Having said that, I believe that this is a clean and rigorous operational separation and should it become necessary in the future which is a matter for Telecom it would be compatible with that direction."

Telecommunications Users Association (Tuanz) chief executive Ernie Newman said the determination was good news for consumers.

"I would give this a qualified nine out of 10 and probably the only reason I wouldn't give it a 10 is I haven't read the detail yet," he said.

"It's not going to make a difference in the market tomorrow morning, but over time it is going to set up the New Zealand telecommunications market to be on a par or better than those in most parts of the world.

"I think if you're a consumer out in the rural areas who has endured shonky broadband services and variable quality fixed lines for a long time, your chances of getting good quality services in the next few years are greatly enhanced by this morning's announcement."

Internet NZ executive director Keith Davidson said the determination was an important milestone for the industry.

"The Government is to be congratulated for its bold move to proceed with the operational separation plan largely as originally envisaged," he said.

"While the determination sets a tight timeframe, it is clear that Telecom and the Government will be working in a spirit of cooperation to ensure the plan's success by separation day."

- NZPA