A. Executive Summary
1. Introduction: This is Telecom's fourth written submission in relation to the present investigation. In addition, Telecom has also presented for three and a half days at the Commission's public conference on unbundling ("Conference") and has provided the Commission with extensive information and clarifications at the Commission's request on numerous other occasions. Accordingly, this submission addresses only those points raised by other parties' 9 February submissions and does not comment further on the Commission's Final Report.
2. TelstraClear has repeated its submissions: TelstraClear raised several matters which it claimed should cause the Minister to return the Final Report to the Commission for reconsideration. With one exception (New Zealand's international obligations), each of the issues had previously been fully canvassed in the course of the Commission's investigation, and the Commission had made its decision after fully taking them into account. TelstraClear has sought to overcome this problem by delivering reports on the old topics from new consultants. Those consultants suffer from the disability that they did not participate in the Commission's investigation, and so are unaware of all the information considered by the Commission. As a result, it is TelstraClear's new consultants, not the Commission, who have failed to consider all relevant issues. This has minimised the value of their contributions.
3. TelstraClear dislikes the Commission's weighting of issues: TelstraClear's main assertion is that the Commission has paid insufficient regard to TelstraClear's previous submissions. However, it is not that the Commission has paid insufficient regard to the matters raised by TelstraClear: it is simply that the Commission has not found them persuasive, in its overall balance.
4. TelstraClear said everything it could possibly say to the Commission in its 1235 pages of submissions and presentations and 1.5 days of evidence at the Conference. The Commission's Issues Paper, Draft Report and Final Report discussed every one of those submissions, and accepted many of them. TelstraClear has not provided any evidence that the Commission failed to consider any relevant issues in arriving at its recommendations. So while TelstraClear may disagree with some of those recommendations they have not provided any grounds on which the Commission could be asked to reconsider them.
5. The Commission's role is to balance the factors which will best promote competition for the long term benefit of end users. The Commission has emphasised this in both its Draft and Final Reports when discussing the weight to give to efficiencies in its decision making process:1
The Act does not direct the Commission as to the weight it should give to efficiencies, as opposed to other considerations. This is a matter for the Commission to consider.
6. The balance struck by the Commission is not one which Telecom thinks is most appropriate - that would require withholding of regulation. However, in the interests of moving on, Telecom would be prepared to accept the Commission's recommendation.
7. TelstraClear wants a more detailed report: The Commission did not explain every nuance of its reasoning in reaching an assessment of the evidence available to it. However, it is clear from the record that the Commission considered all information provided in submissions or obtained through staff research, even if some of those factors are not discussed at length in the Final Report. The Minister should consider the approach of appellate Courts when considering the balanced opinion of the lower courts:2
... specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence. His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance (as Renan said, la verite est dans une nuance), of which time and language do not permit exact expression, but which may play an important part in the judge's overall evaluation.
8. The Commission engaged in nearly a year of investigation, meetings and ongoing dialogue with all participants in addition to the formal hearings, consulted with overseas regulators and obtained evidence which will not be available to the Minister. The 200 page Final Report, necessarily omits much of the detailed analysis undertaken by the Commission. TelstraClear pleads for a "re-weighting" merely because those subtleties have not been fully set out in the Final Report, but that is inappropriate in the situation where the Commission has in fact undertaken the relevant research and consultation and amended the relevant issues.
9. The Minister has a limited role: The Act does not permit the Minister to "clarify" the Commission's recommendations or take into account considerations other than those set out in sections 18 and 19 of the Act. Telecom, therefore, considers it would be inappropriate for the Minister to substitute his own views for those which the Commission has reached after 12 months of intensive consideration, without strong grounds for doing so.
10. Investment is being delayed: Accepting the Commission's recommendation will allow the industry to develop without a cloud of regulatory uncertainty hanging over its head. The alternative would involve at least another six months of investigations, submissions and consideration by the Commission and the Minister and would protract the already lengthy process. Telecom has its own concerns about the Final Report which it would want to have reassessed should the Minister ask the Commission to reconsider.
11. Restatement of Telecom's submissions: In relation to TelstraClear's submissions on the four principal services investigated, Telecom's brief comments are:
- Local loop unbundling ("LLU"): Take up overseas has fallen short of regulators' expectations and experts' predictions and the implementation costs have in some cases still not been recovered. Evidence presented by, amongst others, TelstraClear, confirmed that this experience would be mirrored in New Zealand.
- Line sharing: Telecom agrees with TelstraClear's recommendation that line sharing not be regulated.
- Bitstream access: The Commission's technical description as to the limitations of its recommended bistream access service was arrived at for very good commercial and economic reasons. TelstraClear's recommended "technical" amendments to the recommended service description would have far-reaching and serious commercial and economic consequences. It was for this very reason that the Commission imposed the limitations on the service.
- PDN unbundling: The Commission's decision to allow Telecom's commercial Unbundled Partial Circuit ("UPC") offering to develop, rather than regulate immediately, was the only appropriate recommendation under the Act.
12. The Final Report establishes pervasive and intrusive regulation: As a whole, and combined with other regulation under the Telecommunications Act, the Final Report will result in:
- regulated bitstream unbundling, with cost based backhaul;
- quasi regulated business data tails, with cost based interface;
- regulated business and residential resale;
- regulated unbundling of resale services;
- regulated cost based interconnection; and
- standing power for the Commission to investigate and regulate any element of Telecom's network, at cost if it considers appropriate.
13. This is a pervasive regime. This is in substance as intrusive as many regimes around the world (disregarding the largely symbolic unconditional copper unbundling), and in some respects is more intrusive than many.
14. New Zealand's WTO: Not only are TelstraClear's submissions on New Zealand's WTO compliance irrelevant, they are also wrong. New Zealand is fully compliant with all of its obligations and would be in the mainstream of US Free Trade Agreement requirements should one be negotiated during the term of the Commission's recommended regulation. Telecom will provide full submissions on these issues immediately upon the text of the Australian Free Trade Agreement becoming available.
15. Conclusion: The lengthy investigation undertaken by the Commission has allowed it to determine a balance between dynamic and static efficiencies and true and pseudo competition. As a result, the Commission has managed to design regulation which provides access seekers with unbundled access to Telecom's broadband assets, yet still manages to let Telecom to continue investing in those assets. The Minister should not upset this balance.
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