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• Operational Separation process

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The passage of the Telecommunications Amendment Act in December 2006 was a watershed for our country. For too long, we have languished near the bottom third of the OECD tables for broadband and telecommunications sector performance, and it became clear that without significant change to the competitive environment, our poor performance was destined to continue.

As part of the Telecommunications Stocktake I announced in May 2006, the Act introduced a number of critical new measures that will have a profound effect on competition and investment in New Zealand's broadband infrastructure. They include:

• The unbundling of the copper local loop, freeing up this critical bottleneck resource to enable a greater range and diversity of services to be provided;
• A widening of the definition of the regulated bitstream service enabling a greater range of advanced bitstream services to be provided to the industry, including "naked DSL";
• Introducing a Standard Terms Determination process to provide for the consistent and timely provision of regulated services to all service providers;
• More rigorous and expeditious enforcement measures that will improve the overall integrity of the regime;
• The operational separation of Telecom, to provide a level playing field for all industry participants;
• Other measures regarding spectrum policy, rural telecommunications and a review of the government's incentives/investments in telecommunications networks are being progressed in parallel with implementing the Act.

While the industry is, correctly in my view, focusing heavily on the introduction of new services based on LLU and advanced bitstream, the operational separation of Telecom is critical to ensuring the development of a healthy competitive environment. In particular, operational separation will ensure that all service providers, including Telecom, receive critical wholesale services on equivalent terms, and it will reduce the ability and incentives for the incumbent operator to discriminate against its wholesale customers.

The draft policy positions and proposals outlined in this paper are intended to implement a robust and enduring operational separation of Telecom, in accordance with the government's intentions to underpin non-discrimination and robust competition in wholesale telecommunications markets.

I welcome your views on whether the draft proposals strike the right balance given New Zealand's unique circumstances. Your views will help guide me as I make decisions on the requirements that will be built into my Determination.

I look forward to hearing from you, and I hope that you will continue to be actively involved as this critical process unfolds. New Zealand's future depends crucially upon our businesses, people and communities having the rich communications and IT environment in which to learn, to create, to compete and to live.

Hon David Cunliffe
Minister of Communications