Who will pay what share of downsized telco tax?

Image / 123rf

The Telecommunications Development Levy (TDL) - an annual tax on the telco sector to help pay for public-private projects, has finally been downsized from $50 million per year to $10m per year - four years after originally scheduled.

Telcos chipped in toward the $50m in proportion to their revenue, which meant Spark and Vodafone paid the lion's share.

This morning, the Commerce Commission issued its draft determination of who should pay what share of the $10m total for FY2020.

The usual names are at the top of the list, but paying much less than the $50m days of old.

Spark, which paid $17.4m last year, is earmarked for $3.4m for FY2020.

Vodafone's contribution falls from $12.8m to $2.6m.

The Chorus contribution lowers from $10.9m to $2.1m.

And 2degrees' drops from $4.3m to $872,000, and Vocus from $1.6m to $293,000.

Other players were already on sub-$1m contributions, and most are now under $100,000 (see table below). One of the few with a potentially higher tab is MyRepublic, which has been threatened with a $300,000 fine if it drags its heels on paperwork again.

The TDL was introduced in 2011 to help fund public-private broadband rollouts - particularly the Rural Broadband Initiative, plus emergency service numbers.

It was originally set to fall from $50m per year to $10m per year after 2016 - but the $50m level was extended for another four years by then-Communications Minister Amy Adams as the National-led government of the time announced plans to expand the Rural Broadband initiative in the build-up to the 2016 election - leading to a yelp from a Spark executive that Adams was making promises with "other people's money".

Source / Commerce Commission

During this year's election campaign, Labour promised $60m in new funding to boost broadband in rural areas. Labour's communications spokesperson Kris Faafoi said the money would come from "a new infrastructure fund".

At the previous $50m rate, the TDL was calculated to add $1 (or, at least, 85c plus GST) to every household's monthly broadband bill. Don't look for that to fall to 20c, however. Retail telcos say they are already absorbing increased costs from data caps and disconnections being suspended and the evaporation of roaming revenue during the pandemic; and wholesale price increases from Chorus that kick in this month.

In an Infratil investor day presentation yesterday, the major shareholder said Vodafone NZ would take a $60m to $75m operating earnings hit this year from the coronavirus.