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• Issue 1: Processes for Resolving the Terms and Conditions of Supply of Regulated Services
  • I. The Timely Resolution of Regulated Services Terms
    • Possible Issues
    • Potential Options to Improve the Timely Resolution of Regulated Service Terms
  • II. The Telecommunications Carriers' Forum (TCF) and the Access Code Regime
  • III. The Prompt Introduction of Designated Multi-Network Service Provision
  • IV. The Need to Monitor and Enforce the Implementation of Regulated Services
  • Discussion Questions Issue 1: Process for Resolving the Terms of Supply of Regulated Services
• Issue 2: Process for Adding, Altering or Extending the Term of a Regulated Service
  • V. The Schedule 3 Investigation Process
  • VI. Process for Drafting a Proposed Alteration
  • VII. Need for a Government Policy Statement
  • VIII. Need to Seek Clarifications
  • IX. Need to Clarify Options to Accept, Reject or Ask for Reconsideration
  • X. Need to Amend the Process for Extending the Period of an Existing Regulated Service
  • Discussion Questions Issue 2: Process for Adding, Altering or Extending the Term of a Regulated Service
• Issue 3: TSO Cost and Levy Administration Process Issues
  • XI. Need to Amend the TSO Liable Person Definition
  • XII. Need to Clarify or Amend the TSO Qualifying Revenue Definition
  • XIII. Need to Specify a Methodology for Determining Deductions for TSO Non-compliance
  • Discussion Questions Issue 3: TSO Cost and Levy Administration Process Issues
• Issue 4: Other Implementation Issues
  • XIV. Developing an Undertaking in Lieu of Recommending Regulation
  • XV. Need for Disclosure of Derived Information to Better Enable Monitoring and Public Scrutiny
  • XVI. Need for Information Disclosure - Reference Interconnection Offer
  • XVII. Need for an Industry Funded Service Performance Complaints Resolution Facilitator
  • Discussion Questions Issue 4: Other Implementation Issues
  • XVIII. Any Other Issues

Issue 1: Processes for Resolving the Terms and Conditions of Supply of Regulated Services

13. Comment is sought in the following areas where there may be potential to make improvements:

• the timely resolution of regulated services terms;
• the Telecommunications Carriers' Forum and the access code regime;
• the prompt introduction of designated multi-network service provision; and
• the need to monitor and enforce the implementation of regulated services.

I. The Timely Resolution of Regulated Services Terms

14. This process is of key importance in the operation of the Telecommunications Act 2001. The Act states that an access seeker who requires the supply of a designated or specified service must first make a reasonable attempt to negotiate commercial terms and conditions for access to such a regulated service with the access provider. If the negotiations fail it may then apply to the Commission to make a determination² of all or some of the terms and conditions on which the service must be supplied. This reflects the general preference for commercial solutions over regulatory solutions where possible.

15. Under the determination provisions of the Act the Commission is empowered at the request of an access seeker to resolve any outstanding regulated service terms. Schedule 1 of the Act lists the regulated services and the terms that the Commission is empowered to resolve for each service.

Possible Issues

16. There are concerns that the overall process takes too long and is too costly. The process can be subject to extensive delays because of the time involved dealing with commercial negotiations and the determination process to resolve outstanding access terms and conditions

17. Smaller access seekers may be faced with a choice between waiting for a larger provider to conclude a regulated outcome by way of a Commission determination which can then be used as a benchmark agreement, or reducing uncertainty by reaching a commercial agreement on less advantageous terms.

18. In general, delays in resolving efficient terms of supply of regulated services can limit the benefits that were anticipated from regulation.

19. In some cases the incumbent may decide to offer a commercial service that is similar to but separate from the regulated service. Such a service may be made available earlier than the availability of a regulated service. This can raise problems for an access seeker because section 22 of the Act precludes an access seeker applying for a determination of the regulated service terms where "the persons who would be otherwise parties to the determination have an agreement for the supply of the service for part or all of the specified period of time".

20. An example is Telecom's commercial unbundled bitstream service (UBS) which is broadly similar to the regulated UBS offering. The commercial UBS has apparently been offered on a two year contract basis and therefore service providers who take up this offering may not be able to take up the regulated service until after any current agreement term expires. Access seekers faced with such a choice might have to decide between entering the market at an earlier stage on less advantageous terms or waiting until the regulated service is available on better terms but where earlier entrants have built a sizeable customer base and brand recognition.

Potential Options to Improve the Timely Resolution of Regulated Service Terms

Reference Offer

21. A potentially better alternative for some regulated services might be to introduce a reference offer option. The key objective of such an approach would be to more quickly resolve the key terms of a regulated service.

22. The first phase of this option could involve the preparation of an acceptable reference offer by the access provider in line with a broad directive issued by the Commission that covered the core elements of the designated or specified service.

23. The second phase, if necessary, could involve bilateral commercial negotiations between an access provider and an access seeker of any outstanding issues with a fall-back option where commercial negotiations fail to allow the Commission to determine any remaining terms where requested by an access seeker.

24. This type of approach may have significant potential to reduce the overall time taken to negotiate satisfactory access terms and thus more quickly deliver benefits to users.

25. A first phase of a reference offer could work in a number of ways.

26. For example, one approach could be to empower the Commission to direct an access provider to prepare a reference offer conforming to requirements specified by the Commission including a development timeline. Should the access provider fail to do so, the Commission could also be empowered to prepare the reference offer. Once the reference offer is available, the Commission would consult with affected parties and would make a decision to approve or reject the offer. Once approved, the offer would provide a set of minimum terms that the access provider would be obliged to provide to an access seeker.

27. An alternative approach could be to empower the Commission to more directly supervise the preparation of a reference offer by the applicable access provider(s), coordinate consultation and, when complete, approve the offer.

28. In general a reference offer should:

• address the key requirements of the required service identified by the Commission (requirements could, for example, be identified in a Final Report's recommendations or by the Commission for an existing regulated service);
• for a designated service, include pricing based on an initial pricing principle such as benchmarking and include a requirement to move to a final pricing principle should a party so choose;
• allow an access seeker to use the reference offer as a basis for concluding a commercially negotiated agreement;
• if the reference offer based commercial negotiations either fail or are unduly delayed by an access provider, include the option to move to a determination process to resolve any outstanding aspects, at an access seeker's request;
• where relevant include the option for the reference offer and any associated determinations using the reference offer, to be updated to include designated or specified service improvements where an access seeker requests such an update;
• where relevant include the option for the reference offer and any associated determinations using the reference offer, to be updated to reflect improved terms being offered in other similar publicly disclosed agreements where an access seeker requests such an update.

29. It is probable that a reference offer approach would be more suitable for regulated services that are likely to be requested by a number of access seekers and which require significant development of technical and operational aspects of service provision.

30. The key advantages of a reference offer approach relative to the status quo are likely to be:

• the speedier development of the core technical and operational parameters. In particular it should be possible to set process time bounds;
• a consistent set of core terms and conditions would be available to all access seekers; and
• the reduction in duplication of aspects of the negotiation process that are common to separate negotiations for the regulated service.

31. A reference offer approach may have the following disadvantages relative to the status quo:

• some regulated services may not lend themselves to such an approach for a number of reasons. For example where only one access seeker is likely to request the service or where access seekers are likely to have significantly different technical and operational interface requirements;
• it might result in some regulation where parties are otherwise able to resolve issues by commercial negotiation; and
• it would probably only apply in respect of future regulated service agreements thus limiting its field of application.

Need to Amend Section 22

32. It may be necessary to amend section 22 (a) of the Act so that it only applies where the terms of the service have previously been determined by the Commission and those terms are still in force. This could address the problem that can arise where an access seeker is faced with choosing one of either the service regulated under the Schedule 1 provisions or the equivalent commercially offered service, because it is at present precluded by section 22 (a) from choosing to take the regulated service where it has some other type of existing agreement for the supply of the same service.

II. The Telecommunications Carriers' Forum (TCF) and the Access Code Regime

33. In August 2002 six telecommunications companies formed the Telecommunications Carriers' Forum to develop industry codes for regulated services in accordance with the Act.

34. The TCF as defined in the Act is empowered to prepare draft access codes covering certain aspects of the terms and condition of supply of regulated services and providing 75% of eligible persons agree, forward the draft code to the Commission for approval under the provisions of the Act.

35. Concerns have been expressed that the provisions of the Act do not adequately support the enforceability of an approved access code.

36. Under the Act an access code for regulated services can only be approved by the Commission if it meets the requirements laid down in the Act. Access codes are complementary to determinations and the Act envisages access code enforcement, where required, by way of a determination.

37. The Act (sections 31&32) however does not provide for an application being made for a determination for designated multi-network services of any matters that an approved code already provides for. This would seem to preclude the use of a multi-network determination to enforce the use of an approved access code.

38. The Act (sections 20&22) does not directly provide for an application being made for a designated or specified service determination to enforce an approved code across relevant parties.

39. The TCF has to date prepared three draft codes as follows:

• Network Code for Local and Mobile Number Portability in New Zealand
• Code for Local and Mobile Number Portability in New Zealand
• Code for Co-location of Radiocommunications Facilities for Regulated Telecommunications Services (which has been forwarded on to the Commission for approval)

40. The TCF has experienced some difficulties in meeting the threshold required to submit a draft code for Co-location of Radiocommunications Facilities, to the Commission for approval.

41. There may be benefit in altering the access code referendum threshold for submitting a draft code to the Commission for approval, which is at present 75% of eligible persons. Possible options could be to lower the threshold, for example to 51%, and/or changing the threshold to be a proportion of the votes received, reflecting that in certain cases some members of the TCF will not vote on a particular issue as they do not have an interest in the matter. If the threshold is lowered it may be necessary to provide the Commission with the discretion to decline consideration of access code approval should it consider an investigation is not warranted.

42. The TCF has also experienced some difficulties in preparing draft number portability access codes that contain their own enforceability mechanism, for the Commission to approve. In particular the TCF says that the lack of an enforceability provision in the Act could delay the timely implementation of access codes on co-location of radio communication facilities and long-term number portability, and has requested that the Act be amended to provide an appropriate enforcement mechanism for approved access codes.

43. There may be benefit in changing aspects of the access code regime to better enable the approval and enforcement of access codes.

44. One option may be to provide the Commission with the power to enforce compliance with the code by enabling the Commission to make a determination to that effect in both the multi-network determination provisions and the designated access services and specified services provisions. Under this approach it may also be necessary to enable the Commission to include compliance with an approved code in any relevant determinations currently in force, including the power to negate any provisions in the determination that would not be compatible with the approved code.

45. Other approaches, such as providing the Commission with the power to declare a code binding, may also be possible. However, the code approval process may need to be changed to properly support such an application.

III. The Prompt Introduction of Designated Multi-Network Service Provision

46. There are three designated multi-network services: local number portability service; cellular telephone number portability service; and national toll-free number portability service.

47. National toll-free number portability service has been introduced. A limited capability local number portability system based on call forwarding has been in use for some time.

48. The industry has been working to put in place a satisfactory full capability local number portability service and a cellular telephone number portability service. However, the industry has not been able to reach agreement on these issues.

49. The TCF took over responsibility from the NAD³ for developing a technical specification of the system(s) required to support local and cellular number portability. The TCF is preparing a number of industry codes for use in implementing local and cellular number portability.

50. In March 2004 the TCF published a draft Local and Mobile Number Portability (LMNP) Code that sets out operational procedures and processes, between service providers and between network service providers, for the implementation and ongoing management of number porting processes. Submissions on the draft Code closed in April 2004.

51. On 22 July 2004 the TCF published a draft "Network Code" that provides guidance on the development of acceptable network solutions and specifies the mandatory and optional requirements between networks. The draft code sets out operational standards, procedures and processes between service providers for the origination, carriage, handover and termination of calls where local or mobile numbers are being ported. Submissions on the draft Code closed on 18 August 2004.

52. The detailed inter-network design required to implement LMNP is not covered in this Code. This work is being undertaken separately between the affected networks, and will be managed by the TCF number portability working party.

53. A party seeking access to a designated multi-network service may request the Commission to make a determination of the functions that must be performed by a system for delivering the service and/or the formula for how the cost of delivering the system must be apportioned. Concerns have been expressed that the telecommunications industry has not used these provisions to resolve fixed network number portability and cellular network number portability.

54. In general access seekers have strong incentives to use the mechanisms in the Act to resolve terms and conditions of access to a regulated service, should voluntary commercial negotiation with the access provider fail. Such incentives help ensure that the objectives of the Act, the promotion of competition for the long-term benefit of end-users, are best achieved.

55. An application for a determination of a multi-network designated service can include (a) the functions that must be performed by the service and the service standard, and/or (b) the formula for how the cost of delivering the service is to be apportioned. Any number portability access seeker can make a request for a determination.

56. In the case of some multi-network services, the provision of which is likely to significantly benefit end-users, such as number portability, there can be a risk that potential access seekers will not have sufficient incentives to request the Commission to promptly resolve all aspects of the matter. In such a case it is possible that there could be significant delays in achieving the objectives of the Act.

57. For example, a group of entrants in March 2003 asked the Commission to make a determination of the formula for allocating the cost of delivering number portability. The request was "the applicants seek a determination of the formula for how the cost of delivering the service must be apportioned between participants in Number Portability Services". The Commission is investigating this matter.

58. The industry has asked for a determination of the matter listed in 55(b) but has not yet made a request for the determination of the matter listed in 55(a). The Commission is only empowered to determine issues that parties request it to. In particular the Commission cannot initiate a determination. It is understood that the TCF is considering the use of the Schedule 2 Telecommunications Access Code provisions of the Act to address other aspects of number portability. However, an approved access code can only be enforced under the Act by citing it in a determination.

59. Consequently when the Commission makes a determination of the cost allocation formula for number portability, the provision of fixed network and cellular network number portability will still require either an enforceable industry agreement or a determination of the functions that must be performed by the number portability service(s) and the service standard (the matter listed in 55(b)).

60. If the review concludes that service providers do not have sufficient incentives to initiate an appropriate determination on the functions that must be performed by the number portability service and the service standard, a potential option to ensure that such issues are resolved in a timely manner could be to empower the Commission to initiate a multi-network determination where the Commission considered that there has been undue delay and the prompt resolution of the matter was in the long term interests of end-users. This option would be a move away from the current approach of the Act which focuses on resolving disputes, to imposing regulation in the absence of a dispute. Therefore, there could be some risk of over-regulation.

IV. The Need to Monitor and Enforce the Implementation of Regulated Services

61. It is important that an access provider promptly implement a new or improved regulated service where requested by an access seeker.

62. The review will provide an opportunity for access seekers who use regulated services and other key stakeholders, to comment where relevant on experience to date on the prompt implementation of new or improved regulated services and, if and where relevant, present a case for measures to address any concerns identified.

63. The Act provides for a number of matters to be included in a determination including "the actions (if any) that a party to the determination must do or refrain from doing". The Commission has not, to-date, seen a need to include such a requirement in any determination. It is possible that the inclusion of such a provision in a determination has not been considered in depth because of the absence of the ability of the Commission to effectively monitor and enforce such a provision in a determination.

64. Dependent on the nature and extent of any problems identified, it may be appropriate to provide a provision to enable the Commission to monitor and enforce compliance with particular actions that it sets down in a determination, in order to provide enforcement of the determination terms and conditions from the public good perspective.

65. Dependent on the nature and extent of any problems identified, it may also be appropriate to provide a provision to enable the Commission to monitor and enforce compliance with particular actions that it sets down in a multi-network determination, in order to provide enforcement of the determination terms and conditions from the public good perspective. This could potentially address the possibility that industry parties to a multi-network determination mutually decided not to proceed with the requirements laid down in the determination.

Issue 2: Process for Adding, Altering or Extending the Term of a Regulated Service

66. The Schedule 3 process for adding, altering or extending the term of a regulated service typically involves the following steps.

The Commission:

• may, on its own initiative or if requested to do so in writing by the Minister, commence an investigation into whether or not the service under investigation should be regulated under the Schedule 1 provisions of the Act;
• must give public notice of the investigation where it is satisfied that there are reasonable grounds to proceed;
• must prepare and release a draft report, invite submissions and hold a public conference after the submissions have been received;
• must consider all submissions and information presented when it prepares a final report which it delivers to the Minister of Communications;
• must include in the final report the details of any proposed alteration, a recommendation on whether the proposed alteration should be made, the reasons for the recommendation.

The Minister may-

• either-
  • accept the Commission's recommendation; or
  • reject the Commission's recommendation:
• require the Commission to reconsider its recommendation.

67. Where the Minister accepts a regulatory recommendation, an Order in Council is required to add the service to Schedule 1 of the Act.

68. Some concerns have been expressed that the Schedule 3 process:

• may have led to undue delay in considering local loop unbundling and subsequent implementation of the Minister's decision via an Order in Council;
• does not enable the Commission to take into account issues outside of the Act's section 2 purpose statement in making recommendations on Schedule 3 investigations;
• did not provide for an intermediate consultation step which could have been useful for reducing delays in preparing an Order in Council that accurately described the proposed unbundled bitstream designated service;
• does not adequately provide for the extension of the period of an existing regulated service.

69. Comment is sought in the following areas where there may be potential to make improvements:

• the Schedule 3 investigation process;
• process for drafting a proposed alteration;
• need for a Government policy statement;
• need to seek clarifications;
• need to clarify options to accept, reject or ask for reconsideration; and
• need to amend the process for extending the period of an existing regulated service.

V. The Schedule 3 Investigation Process

70. It is important that the Commission's Schedule 3 investigation process ensure that all the issues are appropriately investigated and considered before the final report is sent to the Minister. Any need for further intermediate steps in the process, such as an issues paper, an opportunity to make cross submissions or a further investigation/consultation period between the public conference and the final report, is left to the discretion of the Commission.

71. There may be a case to provide more certainty about the circumstances where an extra step would be contemplated between the Schedule 3 draft report public conference and the final report. Where required the length of any such step is best left up to the discretion of the Commission, but would be dependent on the extent of any material, new information or matters identified subsequent to the draft report.

72. Clarifying the circumstances where such an extra step would be contemplated could give interested parties greater confidence that they would be able to make available to the Commission all information material to the issues under consideration should the need arise. In particular it could assist in ensuring that any new information is subject to public scrutiny by all interested parties. Any such step would be restricted to dealing only with new material matters or issues as opposed to further litigating existing matters or issues.

73. Such a clarification could help in ensuring the overall robustness of the final report and its recommendations.

VI. Process for Drafting a Proposed Alteration

74. It is important that the drafting of a proposed alteration accurately describes the service. Drafting of such requirements is carried out by Parliamentary Council Office (PCO) on the instruction of the Minister. However, in practice it has been found that there is no scope to change the wording of a recommended Schedule 1 alteration to the Act in the final report once the report has been accepted by the Minister.

75. The review should therefore consider ways of addressing this problem. One potential option could be to provide the Minister with some scope to refine the Commission's recommendation subject to compliance with the policy recommendation(s) in the final report. Alternatively, following acceptance by the Minister of a recommendation by the Commission, a short period of time could be provided under the Act where the Commission could consider submission's on the proposed wording to ensure that the wording accurately reflected the final report's recommendation.

VII. Need for a Government Policy Statement

76. In some circumstances it is important that the Commission have the ability to take into account the Government's policy when it is undertaking an investigation and considering making regulatory recommendations in a final report. This could be achieved by a provision similar to s26 of the Commerce Act. Such policy statements could, for example, articulate New Zealand's international treaty requirements in relation to telecommunication service markets. Such a provision would not bind the Commission; it would simply require it to take the policy statement into account when considering specific issues.

VIII. Need to Seek Clarifications

77. In considering the Commission's final report on local loop unbundling some legal difficulties were encountered in seeking a clarification from the Commission. The Act provides that the Minister can either, accept, reject or ask the Commission to reconsider its recommendations, but does not provide for the Minister clarifying points contained in the Commission's report, including economic and technical clarifications.

78. It is important that the Minister, as decision-maker, is able to discuss the recommendations with the Commission, including asking for further information from the Commission to better understand the recommendations, should it be required. This could be achieved by a inserting a provision to enable the Minister to seek written clarifications on specific matters in a final report from the Commission.

IX. Need to Clarify Options to Accept, Reject or Ask for Reconsideration

79. The Commission's final report on local loop unbundling made a number of recommendations some of which were interlinked. Parties with an interest in unbundling had different views about the degree of interlinking of the recommendations and hence the ability of the Minister to accept, reject and/or request a reconsideration of the final report recommendations as a whole or consider them separately. In addition, it was not clear to what extent the Minister could seek reconsideration of one or more issues and request a sequenced report back where such an approach was compatible with the requirement on the Commission to consider all issues material to a particular matter before making a final report.

80. There may be a case for more explicitly spelling out the Minister's options to accept, reject or ask for reconsideration. For example, the focus of each decision could be with respect to an "integrated recommendation" which could be made up of a number of recommendations which the Commission considered to be closely related. The Minister could then separately consider each "integrated recommendation" made in a final report.

81. There may also be justification for explicitly providing for a reconsideration to provide a staged report back on each integrated recommendation, as long as the staged decision making was not incompatible with the requirement on the Commission to consider all issues material to a particular stage before reporting to the Minister on that aspect.

X. Need to Amend the Process for Extending the Period of an Existing Regulated Service

82. The Act provides for the extension of an existing regulated service for a period of two years where the Commission recommends an extension. However, the Act requires the Commission to follow the Schedule 3 procedure for altering regulated services. This means that the Commission is required to follow an investigation process that is similar to the one it has to do for a new regulated service. The only practical difference would seem to be a two year time horizon as opposed to a five year time horizon for a new regulated service investigation.

83. This process appears to be unsatisfactory from two perspectives.

84. Firstly, if a detailed investigation is carried out of the need to extend the period it would be more appropriate to provide for the possibility of a five year extension.

85. Secondly, given that there was a need for the service to be regulated in the first place, it may be more appropriate to introduce a lesser test to assess the case for extending the period of a regulated service.

86. It is important that any lesser test used to asses the case for extending regulation be as reliable as a full process for investigating the need for extending the period.

87. It is possible that a lesser test based on assessing whether competitive conditions had changed sufficiently could be a reliable lesser test for assessing the need for extending the period of regulation. It may also be appropriate to build in a safeguard whereby such a test could only be applied twice after which a full investigation process would have to be used to assess the case for further extending the term.

Issue 3: TSO Cost and Levy Administration Process Issues

88. The Act sets up a process to declare TSO instruments, determine the cost of a TSO instrument levied on liable persons, and determine the charge to be paid by each liable person.

89. Some problems have been encountered with Telecommunications Act related administration of TSO matters.

90. Comment is sought in the following areas where there may be potential to make improvements in the administration of TSO issues:

• need to amend the TSO liable person definition;
• need to clarify or amend the TSO qualifying revenue definition;
• need to clarify or amend the TSO net-cost definition; and
• need to specify a methodology for determining deductions for TSO non-compliance.

XI. Need to Amend the TSO Liable Person Definition

91. It may be desirable to amend the liable person definition to remove the incentive for an entity to restructure its operations into separate wholesale and retail operations in order to avoid the TSO liability of the otherwise combined wholesale/retail operation. This type of amendment may be necessary to ensure that retail telecommunication service providers each bear their fair share of TSO costs and to also ensure that the TSO costs are spread across such retail service providers in a competitively neutral way.

XII. Need to Clarify or Amend the TSO Qualifying Revenue Definition

92. The TSO qualifying revenue definition determines the amount of the TSO net-cost that a liable person will be required to pay to the TSO provider.

93. Some liable persons consider that the TSO qualifying revenue definition disadvantages their provision of telecommunications services relative to other telecommunications service providers.

94. In some cases service providers use a "bill and keep" network interconnection arrangement where little, if any, actual interconnection payments are made (typically because the parties have agreed that the traffic in each direction is in balance and they wish to avoid payment transaction costs). It is possible that the exclusion of such implicit wholesale revenues distorts the optimal allocation of TSO costs across liable persons.

95. There may be other implicit wholesale or other revenues that are currently not taken into account in assessing TSO qualifying revenues and for which there is an arguable case for including. Possible examples are some directory listing revenues, some data service revenues, receipt of which relies on the existence of the public switched telephone network (PSTN).

96. There may be a case to explicitly empower the Commission to choose what it considers to be the TSO liability qualifying revenue basis that best meets the requirements of the Act.

XIII. Need to Specify a Methodology for Determining Deductions for TSO Non-compliance

97. Under the process set out in the Act there is provision for the Commission to make a deduction from the TSO cost of provision for non-compliance with service delivery standards set out in the TSO agreement. However, the Act does not set out how to determine any such deductions.

98. Comment is sought on whether there is a need to amend the Act to include a suitable methodology.

Issue 4: Other Implementation Issues

99. This section calls for public input and comment on whether submitters consider there are other implementation issues, excluding issues specifically excluded by the terms of reference of the review, where problems have occurred or delays have been encountered. This section seeks comment on the nature of such problems or delays, and where appropriate seeks suggestions on changes that would better achieve the objectives of the Act.

100. Some concerns have arisen in the following areas and there may be potential to make improvements:

• developing an undertaking in lieu of recommending regulation;
• need for a provision to make derived information publicly available to better enable monitoring and public scrutiny;
• need for information disclosure - Reference Interconnection Offer; and
• need for an industry funded service performance complaints resolution facilitator.

XIV. Developing an Undertaking in Lieu of Recommending Regulation

101. The Commission in its final report on unbundling said that it did not recommend designation or specification of an unbundled partial private circuits (UPC) service. The Commission noted that this decision was influenced by Telecom's action in announcing on 13 November 2003 an UPC service that has the potential to adequately address a major "bottleneck" feature of the market for the provision of high quality committed bit rate services to corporates and other large users. Though the Commission said it was not satisfied that the proposal was suitable in its current form, the Commission said that an opportunity should be allowed for industry negotiations to result in an enhanced service that will promote further competition in that market. Should such an outcome fail to eventuate within the next six months, the Commission considers that it would be appropriate to re-evaluate the merits of regulated unbundling of a data tails or UPC service at a long-run incremental cost price as an alternative means of addressing the access bottleneck.

102. Subsequently the Commission monitored Telecom's development of a UPC service including technical parameters and application of initial and final pricing principles, and informed the Minister of Communication on 25 June 2004 that "I can confirm that the Commission is satisfied that the implementation of the undertakings in accordance with their terms will have the result that the Commission will not require to re-evaluate the merits of regulated unbundling of Telecom's fixed public data network".

103. A submission was received expressing some reservations about the Commission's decision to not proceed with re-evaluating the merits of regulated unbundling of Telecom's fixed public data network.

104. It is appropriate that the Commission in undertaking a Schedule 3 investigation take into account satisfactory commitments or undertakings by a potential access provider before making a recommendation to the government that a service be regulated. It is also appropriate that an access provider develop an undertaking directly with potential access seekers via commercial negotiations. The issues that arise are the nature and extent of negotiations including consultation aspects, required to produce a satisfactory commitment or undertaking.

105. Some restrictions on developing undertakings may be appropriate in Telecommunications Act 2001 proceedings because:

• the process of the Commission developing a satisfactory undertaking is not directly supported by the Act;
• the Act provides mechanisms which may provide more certainty in achieving the desired outcome (for example deferred designation); and
• difficulties in fulfilling international obligations may arise in some situations.

106. Limiting the Commission's ability to accept commitments or undertakings may limit its flexibility in reacting to commercial commitments which potentially enhance consumer welfare without the costs of regulation.

107. The review should consider whether there is a need for providing a process to directly support the development of undertakings or whether they should be restricted.

XV. Need for Disclosure of Derived Information to Better Enable Monitoring and Public Scrutiny

108. To better enable the Commission and the public in general to monitor and scrutinise outcomes in key telecommunications service provision areas it may be desirable to provide the Commission with the power to publicly disclose summary information derived by the Commission from confidential data supplied by telecommunication service providers. The obligation to disclose would be limited to where the public disclosure of summary information did not allow the confidential underlying data to be determined, e.g. by reverse engineering.

109. The power could be set up to be exercised where the Commission considered the likely benefits of public disclosure, such as improved monitoring and public scrutiny, enhanced decision making and hence improved efficiency, would outweigh any likely detriments arising from disclosure.

110. At present the Commission treats requests for disclosure of such information under the provisions of the Official Information Act. Such requests have been made to the Commission to disclose some derived data in its TSO net-cost determination. The Commission's TSO net-cost determination process identifies service areas which are judged to be commercially non-viable because the cost of efficient telephone service provision exceeds telephone service revenues. However, the Commission releases the overall TSO net-cost and has declined requests for more detailed derived information on the basis that release of such information would commercially prejudice Telecom's interests and is not in the public interest.

111. In addition the provisions of the Official Information Act do not deal with the use of underlying confidential information by the Commission to provide proxy, or index related aggregated high level statistical data.

112. It could be in the public interest to make such information more available. Wider provision of such derived information could assist performance monitoring over time, improve decision making, and better inform public debate. In addition, given that liable persons pay for a portion of the net-TSO costs they may arguably have some rights to the more general availability of TSO related derived information. However, it is important to protect the confidentiality of data supplied in good faith by an access provider; otherwise the Commission's ability to accurately estimate TSO costs could be impaired.

113. Some examples of the use of this type of this type of derived information disclosure could be:

• the identification of net cost TSO areas at a local level including the estimated net cost;
• use of a range of retail price information provided to the Commission on a confidential basis as input to calculate a price index for use in tracking the performance and effectiveness of the regime.

XVI. Need for Information Disclosure - Reference Interconnection Offer

114. Under New Zealand's WTO telecommunications obligations, a major supplier is required to make a reference interconnection offer publicly available. At present there is a voluntary agreement with Telecom New Zealand to disclose this information.

115. This review seeks public comment on another option for meeting these requirements. In particular, whether to include in the Act reserve information disclosure regulation making powers to require parties to publish a reference interconnection offer.

XVII. Need for an Industry Funded Service Performance Complaints Resolution Facilitator

116. The level of service performance related complaints that continue to be referred to the Minister of Communications suggest that there may be a need to improve how telecommunication service providers respond to and deal with such complaints. In this respect some other countries have put in place a Telecommunications Ombudsmen to address service performance concerns that cannot be addressed directly between the parties. However, formal Ombudsmen based mechanisms are quite costly and should only be considered where significant ongoing problems are evident, which does not appear to be the case in New Zealand.

117. This review seeks public input on the case for establishing a simple mechanism to provide independent facilitation of resolution of users' telecommunication service performance concerns, below a reasonable monetary value, that would supplement service providers existing service support mechanisms. The monetary value cut-off level could be set at a level above which other process, such as the use of legal redress, should be considered.

118. For example, one possibility could be the voluntary establishment of an independent facilitator or similar mechanism to assist resolution of residential and small business telecommunications users' service performance related complaints referred to it either by the Minister of Communications, directly by telecommunications users' or service provider replies referred back to users' via the facilitator.

119. Under such an approach the facilitator would in all cases first need to consider whether there was an issue of substance. Reasons for excluding further consideration could be where the facilitator had reasonable grounds to reach the view that the complaint was frivolous or vexatious or was not made in good faith.

120. Where an issue was judged to have substance the facilitator could provide an independent view that the service quality level referred to in the complaint:

• either complied with the service providers service provision contractual obligations or in the case that no express obligations exist was a reasonable and sensible level of service quality in the circumstances; or
• that it fell short of an agreed, implied or other reasonable standard and required some improvement or redress.

121. To help ensure that the mechanism was effective there would need to be an agreement by service providers to consider the facilitator's view and move to address any concerns identified.

122. Such a mechanism would need agreement on a range of matters to put it in place, such as:

• the need to pilot the proposal in order to test viability;
• terms of reference including extent of responsibilities of the independent facilitator;
• governance arrangements including consumer, service provider and other representation;
• funding arrangements including initial term; and
• method of working.

123. Other approaches to assisting the resolution of such issues could be possible.

124. Should it not prove possible to achieve industry agreement to a satisfactory voluntary independent facilitation or similar mechanism, dependent on the level of public concern identified in the review it may be necessary to consider a legislative requirement for industry to fund a suitable mechanism to address identified concerns.

XVIII. Any Other Issues

125. Within the scope of the review are there any other matters, clarifications, comments or suggestions that might better enable the Telecommunications Act 2001 objectives to be achieved?

²A determination is enforceable, by any party to the determination, as a judgement of the High Court in its civil jurisdiction.

³Number Administration Deed. The NAD is an industry-based mechanism for the centralised and independent administration of the parties' telecommunications numbering resources including some aspects of number portability.