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New Zealand Regulatory Environment for Telecommunications

[ Last Updated 16 November 2005 ]
Status:Archived

TELECOMMUNICATIONS INFORMATION LEAFLET NO. 1

July 1997

Communications Division
Ministry of Commerce
ISSN 1172-1510

INTRODUCTION

The Ministry of Commerce is responsible for advising the Government on the regulatory policy for the telecommunications sector. This work is carried out by the Communications Division which provides policy advice to the Minister of Communications on telecommunications, broadcasting, the radio spectrum, and postal services.

This leaflet outlines the regulatory environment for telecommunications. This description is not exhaustive, nor is it a substitute for the terms of relevant laws or regulations or Agreements. Interested parties should take appropriate advice on the applicable laws and international obligations.

GENERAL POLICY

In telecommunications, the New Zealand Government has stated that its objective is to establish and maintain efficient markets in telecommunications goods and services. To this end, it has adopted policies and promoted statutory measures to facilitate competitive entry into those markets, and to maintain the conditions for effective competition.

PRINCIPAL MEASURES

The principal statutory measures which comprise the regulatory environment for telecommunications are:

The above legislation with the exception of the Privacy Act, is administered in the New Zealand Ministry of Commerce, Wellington.

The regulatory environment in New Zealand is also affected by certain obligations associated with the privatisation of the Telecom Corporation of New Zealand Limited [link to Telecom website] (Telecom) and obligations arising from international agreements to which New Zealand is a party.

COMPETITION LEGISLATION

New Zealand maintains no industry-specific regulation for entry into the supply of telecommunications goods or services. Instead, reliance is placed on the Commerce Act 1986 (as amended by the Commerce Amendment Act 1990), which is the general law of competition in New Zealand. The Commerce Act is the primary statutory instrument through which conditions of effective competition in telecommunications are secured. The Commerce Act is enforced by an independent statutory body, the Commerce Commission.

The parts of the Act of major relevance to the telecommunications sector are Part II -Restrictive Trade Practices; Part III - Mergers and Takeovers; and Part IV - Control of Prices.

Part II includes prohibitions on contracts, arrangements and understandings that substantially lessen competition, exclusionary provisions, price fixing, resale price maintenance and the use of a dominant position in a market for the purpose of restricting, preventing or deterring entry or eliminating a person from a market.

Part III relates to mergers or takeovers. The objective is to prevent any business acquisition which results in a person acquiring or strengthening a dominant position in a market, unless that business acquisition can be justified in terms of public benefit. Acquiring or strengthening a dominant position in a market reduces competition and disadvantages consumers. Clear public benefits are required to outweigh these disadvantages. The regime includes offence and remedy provisions aimed at encouraging the prior clearance or authorisation of all mergers that raise competition issues.

Part IV makes provision for the imposition of price control generally, or on particular firms, or even specific products and services, in circumstances where the Minister of Commerce is satisfied that conditions of effective competition do not exist and control is necessary to protect users, or consumers, or, as the case may be, of suppliers. It is the Government's general policy not to introduce price control, nor has the Minister of Commerce announced the detailed circumstances in which control would be considered in relation to telecommunications prices. Commerce Commission inquiries and reports may, nevertheless, be initiated either at the request of the Minister of Commerce, or of its own motion, and, if necessary, control recommended.

TELECOMMUNICATIONS LEGISLATION

Restrictions on the provision of telecommunications goods and services have been progressively abolished since 1987. The passage of the Telecommunications Act 1987 (providing, inter alia, for the phased relaxation of restrictions on customer premises equipment) and, with the commencement of the Telecommunications Amendment Act 1988, (removing restrictions on the supply of telecommunications services of all kinds) by 1 April 1989. The remaining provisions of the Act relate to the promotion of conditions of competition in respect of access to land, and regulatory powers with respect to international telecommunications services. The Telecommunications Amendment Act 1990 established regulation-making powers used to establish information disclosure requirements on Telecom, with the purpose of facilitating effective competition.

Section 2A of the Telecommunications Act 1987 (as amended by the Telecommunications Amendment Act 1988, and further amended by section 86 of the Broadcasting Act 1989) provides a statutory process whereby, under an Order in Council, companies providing either telecommunications services between ten or more persons, or broadcasting services, by lines, to more than 500 persons, may be declared a network operator. The purpose of this procedure is to assist companies providing these services, who require access to land, particularly the road reserve, to lay cables or to construct lines. It is not essential to be designated as a network operator to provide telecommunications services. Telecom is deemed to be a network operator and several declarations have been made since this legislation came into force.

The Telecommunications (International Services) Regulations 1994 provide for the registration of any person providing public switched telecommunications services, or leased circuits, between New Zealand and any overseas operator in a territory outside New Zealand. The 1989 regulations required compliance by all registered persons with requirements for "parallel" accounting and proportionate returns of traffic. The 1994 regulations remove this blanket requirement, leaving registered operators to negotiate freely with overseas operators. Special conditions are applied only where considerations of harm to users arise. These conditions may include requiring the registered operator to pay the same rates of settlements, in accordance with the same accounting method, that an overseas operator charges other registered operators; and to terminate or transit traffic with an overseas operator in direct proportion to the returning traffic carried for any overseas operator. The Secretary of Commerce is empowered to grant waivers in respect of certain terms and conditions of the Regulations. To date, this power has been used in respect of international transit traffic for both Clear Communications Limited and Telecom, and in respect of accounting rates established with Australia.

The Telecommunications (Disclosure) Regulations 1990impose certain information disclosure requirements on the Telecom Corporation of New Zealand Limited (Telecom) and its subsidiaries. These requirements recognise that, at present, Telecom does not face effective competition in the provision of certain telecommunications goods and services. Under the Regulations, Telecom is required to publish information on the prices, terms and conditions under which certain prescribed services are supplied. Following a review, conducted by the Ministry, the Regulations were amended in December 1993. Under the 1993 amendment, Telecom is obliged to disclose all interconnection agreements with other parties, including its own subsidiaries. In addition, Telecom is required to publish separate financial statements for its principal operating subsidiary, Telecom New Zealand Limited.

Interconnection is the key issue in the development of competition in New Zealand. The Government's policy of not promoting industry-specific interventions places reliance on fair interconnection arrangements being negotiated between Telecom and firms seeking to supply telecommunications services. The Government monitors the development of these arrangements, and has stated that if the conditions for competitive entry are unnecessarily impeded it will consider the introduction of further measures.

GOVERNMENT STATEMENT ON COMPETITION

On 9 December 1991, the Government issued a statement of its policy towards the development of competition in telecommunications markets in New Zealand. (Copies of this statement are available from the Ministry of Commerce.) This statement confirmed the Government's view that competition was the best regulator of telecommunications markets in New Zealand.

The statement identified the key features of existing policy, and stated that

  • "if it proves to be necessary, the Government will consider the introduction of other statutory measures or regulation. It will take particular care to ensure that it is not seen to be acting merely to enhance the commercial position of one firm or group within society at the expense of another."

    • The statement went on to note that interconnection was the critical competition issue. In this respect, the Government expected all parties to act in good faith; to expedite negotiations, and any court actions; and to recognise the unique regulatory features of New Zealand's telecommunications markets.

    INDUSTRY FORUMS

    Industry concern about the competition implications of telecommunications numbering arrangements were examined by the Ministry of Commerce in 1991 and 1992. Two reports were issued, and as a result of this examination, the New Zealand Telecommunications Numbering Advisory Group was established. This Advisory Group provides a forum for representatives of network operators, users, and the Ministry of Commerce. It is chaired by the Ministry, which also provides the secretariat. The Advisory Group has established a work programme and it meets on a regular basis.

    In 1992, the Minister of Communications agreed to an industry proposal that the Ministry of Commerce convene meetings of parties involved in interconnection disputes to enable them to jointly brief the Ministry on the issues involved. The meetings, which are convened on the request of either party to a dispute, are chaired by the Ministry and are attended by both parties involved (that is, Telecom and the network operator seeking an interconnection service). At these meetings, both parties are able to brief the Ministry on issues of dispute, and this, in turn, enables the Ministry to brief the Minister of Communications.

    THE SALE OF TELECOM

    In September 1990 the Government sold its entire 100 percent shareholding in Telecom Corporation of New Zealand Limited [link to Telecom website] , to private sector interests. The Government set certain conditions for the sale of Telecom. These conditions were:

    • a ceiling of 49.9 percent on the shareholding of any foreign buyer, (although provision was made for a larger shareholding to be acquired, provided it was reduced to 49.9 percent within three years, with allowance for an extension of one additional year. This extension was agreed in earlier 1993, however the condition was fulfilled within the original three year time period);
    • a requirement that at least $500 million worth of shares must be made available by public offering on the New Zealand market (this requirement was fulfilled by March 1993); and
    • retention by the Government of a Kiwi (or golden) share with special voting rights to control the maximum shareholding of any single foreign party and transfers of blocks of shares among parties; and to ensure Telecom's compliance with its residential services pledges.

    Telecom provided the Government with three pledges in respect of its residential services. The Government included these pledges in the Articles of Association of the Corporation. These pledges provide the following commitments:

    • local free calling will remain a tariff option available to all residential customers;
    • the Standard Residential Rental for a phone line will not rise faster than movements in the Consumer Price Index unless the profits of Telecom's Regional Operating Companies are unreasonably impaired; and
    • phone line rentals for residential customers in rural areas will not be higher than in the cities, and the residential service will remain as widely available as it is at present.

    In 1990, Telecom also agreed to a request from the Minister of Consumer Affairs to publish quality of service indicators for the residential service. In addition, Telecom operates a Permit to Connect programme under which anyone seeking to provide telecommunications equipment for connection to the Telecom network must gain prior approval. The programme is designed to check safety and compatibility features of equipment. This programme has gained widespread acceptance from the industry and from the public. The operation of this programme and all other Telecom activities are subject to the Commerce and Fair Trading Acts.

    RADIOCOMMUNICATIONS LEGISLATION

    The Radiocommunications Act 1989 introduced fundamental reforms to the management of the New Zealand radio spectrum in order to facilitate competitive entry in telecommunications and broadcasting, as well as to promote efficiency in spectrum management. Provision is made in the Act for the establishment of management rights of up to 20 years and subordinate licences in the name of the Secretary of Commerce, and for transfers and subdivision of such rights. It is the Government's general policy that where the demand for such rights or licences exists, supply of those rights will be tendered. The Ministry of Commerce has a programme of planning and creating management rights and, where necessary, arranging tendering of those rights (subject to any Government policy decisions). Acquisition, or disposition, of a management right is deemed to be an acquisition, or disposition, in terms of the Commerce Act and the requirements of the mergers and takeovers provisions of Part I II apply.

    Rights to cellular telephone frequencies were tendered in 1990. The successful bidders were required to obtain Commerce Commission clearance before uplifting the rights. Telecom New Zealand enjoyed incumbency rights to one of the bands, and three further bands were offered for tender. BellSouth New Zealand Ltd [link to BellSouth website] successfully secured -the rights to one frequency band, and Telecom acquired the rights to another. A third right was retendered in 1993, and Telstra (New Zealand) Limited secured it. Telecom operate an analogue AMPS cellular service, and has introduced a digital AMPS cellular service, while BellSouth is offering a digital GSM service.

    The Ministry of Commerce is also planning to tender radio frequencies for land mobile services. Licensing of a variety of other telecommunications service applications is administered flexibly by the Ministry. Certain equipment standards restrictions are maintained in order to minimise radio interference.

    The Radiocommunications Act 1989 is currently under review, a discussion document has been published.

    FAIR TRADING AND CONSUMER LEGISLATION

    The Fair Trading Act 1986 (as amended by the Fair Trading Act 1990) prohibits certain defined unfair trading practices and false or misleading representations. It also makes provision for product safety requirements and regulatory powers.

    OTHER LEGISLATION

    Section 86 of the Broadcasting Act 1989 extended the network operator designation powers to the broadcasting industry.

    The Overseas Investment Act 1973 provides for the supervision of foreign investment generally. New Zealand's policy is to encourage overseas investment, and, in general, there are no restraints on the extent or level of ownership of businesses. The Government has no special policy in relation to investment in telecommunications except in relation to the overseas ownership of the principal shareholding in Telecom.

    INTERNATIONAL AGREEMENTS

    International service providers registered under the Telecommunications (International Services) Regulations 1994 are required to comply with such international telecommunications agreements and conventions to which New Zealand is a party. When representing New Zealand at meetings of international telecommunications organisations, New Zealand operators are required to comply with New Zealand's foreign policy and the Government's telecommunications policy. New Zealand is a member of a number of international telecommunications organisations, including the International Telecommunications Union [link to ITU website] (ITU), INTELSAT[link to INTELSAT website] and INMARSAT [[link to INMARSAT website], and several regional bodies.

    International Telecommunication Union

    The International Telecommunications Union [link to ITU website] (ITU), is an international treaty-making body established under United Nations auspices. The ITU is the preeminent international standards-setting body in telecommunications. ITU Recommendations form the basis of the bulk of telecommunications standards used in New Zealand.

    The Ministry of Commerce represents the New Zealand Government in the ITU. The Ministry heads the New Zealand delegations at Plenipotentiary Conferences of the ITU, and at the World Conferences of the Radiocommunication [link to ITU website] and Telecommunication [link to ITU website] Standardisation Sectors. The Ministry encourages the widest possible interest and participation in ITU affairs, to ensure that positions adopted by New Zealand delegations are as representative as possible of New Zealand's national interests.

    ITU Study Groups consider specific Recommendations and related technical issues. New Zealand attendance at individual Study Group meetings of the ITU is comparatively limited and, in many cases, is undertaken by the Telecom Corporation of New Zealand on the Ministry's behalf. The Ministry circulates draft Recommendations and information about forthcoming meetings to interested parties, and encourages input and attendance.

    A number of New Zealand entities, including Telecom New Zealand, Broadcast Communications Ltd [link to BCL website] and Clear Communications Ltd [link to Clear website] have Recognised Operating Agency status within the ITU, which entitles them to participate in lTU activities in their own right.

    INTELSAT

    INTELSAT Legislation website][link to INTELSAT website] (the International Telecommunications Satellite Organisation) is an international cooperative providing satellite services on a non-discriminatory commercial basis. The New Zealand Government is a Party to the INTELSAT Agreement (and is represented by the Ministry of Commerce). Under the provisions of the Agreement, each Party must designate an entity to act as Signatory to the Operating Agreement and to take responsibility for financial and operational matters. The Government has designated Telecom New Zealand as Signatory to the INTELSAT Operating Agreement. Telecom has ownership shares in INTELSAT.

    In cooperation with Telecom (and other organisations), the Ministry of Commerce has established procedures for access to INTELSAT capacity. In essence, bona fide potential operators of INTELSAT capacity, including those registered under the Telecommunications (International Services) Regulations 1994, may either:

    • purchase capacity directly from Telecom; or
    • obtain capacity via Telecom's Office of Signatory Affairs (an Office established by Telecom to deal with all requests for INTELSAT capacity in a confidential and non-discriminatory manner); or
    • deal directly with INTELSAT, subject to certain arrangements concerning Signatory liability.

    WORLD TRADE ORGANISATION (WTO)

    New Zealand is a party to the WTO Agreement on trade in basic telecommunications.

    REGIONAL TELECOMMUNICATIONS BODIES

    The Asia Pacific region is a crucial trading area for New Zealand generally. It has increasing importance in the telecommunications area, both because of the growth of telecommunications markets in the region and in terms of standards and related activities.

    APEC Working Group on Telecommunications (APEC TEL)

    The Asia Pacific Economic Cooperation grouping (APEC) [link to APEC website] is an important regional focus for a number of activities related to regional trade liberalisation. The Ministry of Commerce has the lead responsibility for New Zealand's involvement in the APEC Working Group on Telecommunications (WGT). The Customs Department also has taken a leading role in the WGT's project group on electronic data interchange. The working group's current activities include a standards network project, studying the use of EDI by small and medium-sized enterprises, and assembling and analysing information from all 18 Member Economies on competition in the telecommunications sector.

    The Ministry is hosting the next APEC TEL meeting (#16) in Wellington from 22-26 September 1997.

    Asia Pacific Telecommunity

    New Zealand joined the 29 member Asia Pacific Telecommunity [link to APT website] (APT) in 1993. The Ministry of Commerce has the lead responsibility for New Zealand's involvement in the APT. The APT has an increasing focus on the restructuring and financing of the telecommunications industry in the region, and is an effective forum for the exchange of ideas on policy issues, including regional radiocommunications matters.

    NOTE

    Legislation may be obtained from Bennett's Government Bookshop, PO Box 5334, Lambton Quay, Wellington. Acts are available to browse at the GP Print site. For references to New Zealand's international obligations and requirements at domestic law contact should made with

    The Manager
    Telecommunications Policy
    Communications Division
    Ministry of Commerce
    PO Box 1473
    WELLINGTON
    New Zealand
    Telephone: (+64 4) 472-0030
    Facsimile: (+64 4) 499-0797

    Information correct as of July 1997

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