Terms of Reference

Context

The Telecommunications Service Obligations (TSO) regulatory framework was introduced by the Telecommunications Act 2001, and facilitates the establishment and administration of TSO instruments for the supply of telecommunications services to end users for meeting government social objectives. The Local Residential Telephone Service (Local Service) TSO was created in 2001 to cover Kiwi Share requirements for ordinary local telephone service.

The findings of the Telecommunications Industry Stocktake announced by the Minister of Communications in May 2006 identified the need for a review of TSO arrangements to ensure these continue to be effective. These terms of reference outline the scope of issues to be addressed in the TSO review.

Scope and Objectives

The primary objective of the review is to consider improvements to the TSO framework in the interests of telecommunications consumers in New Zealand. This includes assessing the effectiveness of the Local Service TSO.

The main areas that the TSO review will focus on are the:

• TSO requirements for the supply of telephone and Internet access services;
• TSO role in the supply of emergency call services;
• TSO role in the supply of rural broadband services; and
• Rules for the application of TSO levies on the industry to recover charges for services supplied under TSO instruments.

Issues for Consideration

Specific matters that the Review will examine include:

• Whether the Local Service TSO is achieving the objectives for this TSO instrument, and the wider objectives of the TSO framework and telecommunications regulatory regime;
• The impacts of market competition on the economic sustainability of the existing Local Service TSO requirements;
• The impact of the Local Service TSO on the infrastructure investment incentives of alternative service providers;
• Whether TSO supply of telephone and Internet access services should be made contestable;
• "Provider of Last Resort" requirements and the feasibility of appointing multiple TSO providers for the supply of TSO local telephone service;
• The extent and form of TSO subsidisation for local telephone services and user eligibility for subsidised service;
• The need for continued price control of local telephone service, the method of price control and the enforcement mechanism for price control going forward;
• Compensation to Telecom for the supply of services under the Local Service TSO;
• Potential changes to the services specified for supply under the Local service TSO to recognise the industry transition to Internet Protocol (IP) technologies;
• The suitability of existing TSO service performance standards and measures in a broadband and /or IP next generation network technology environment; and
• Whether to include rural broadband Internet access in the range of TSO services.

(Note: the review excludes consideration of the Relay Service TSO as this was the subject of a review concluded in July 2006)

The review is predicated on retaining for consumers generally the basic service entitlements prescribed in the existing TSO Deed for local telephone service. Changes would be considered to improve the supply of service within a next generation network environment. However, the option of charge free local calling on dial-up would be preserved.

Interrelationships

The TSO review shall be mutually supportive of the objectives for other areas of policy study and review which impact on the TSO framework, including:

Digital Strategy (including the Broadband Challenge)

The TSO framework should complement the vision for digital connectivity, content and confidence, with an emphasis on supporting the goal of extending the reach of broadband.

Rural Broadband Strategy

The strategy is identifying gaps in the availability of broadband services for rural areas and solutions to closing these gaps. A TSO is a possible mechanism that could be used to address shortfalls in the coverage of broadband networks.

Operational Separation Undertakings

Implementation of separating the Telecom business organisationally for meeting transparency and non-discrimination goals to facilitate competition may necessitate consideration of splitting TSO requirements across particular Telecom business units.

Emergency Telecommunications Services Strategy

The government strategy under development for public safety telecommunications by the inter-agency ETS committee will provide guidance and direction for the future mode of operation for the supply of emergency call services.

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