1. This statement sets out the policies and practices that the Chief Executive of the Ministry of Economic Development (the "Chief Executive") intends to apply in administering the Telecommunications (International Services) Regulations 1994 (the "1994 regulations"), as amended by the Telecommunications (International Services) Amendment Regulations 1997 (the "1997 amendments"). This statement also reflects the decision by the Government to repeal the 1994 regulations and to amend the 1994 regulations pending the passing of the necessary legislation. All further references to the 1994 regulations include the 1997 amendments. It has been issued by the Ministry of Economic Development (the "Ministry"), with the purpose of assisting relevant parties to comply with the regulations.

2. This statement does not have any formal legal status as such, and may be subject to change from time to time as the Ministry sees fit. It should be read in conjunction with the regulations. Any revisions of this statement will be sent to all registered persons.

Background

3. The regulations replace the Telecommunications (International Services) Regulations 1989 (the "1989 Regulations").

4. The 1994 regulations require any person wishing to provide certain international telecommunications services to and from New Zealand to obtain registration before providing those services. New Zealand has no restrictions on the number of operators able to enter the market and there are no restrictions upon the level of foreign ownership for entities wishing to be registered.

5. The 1994 regulations are made pursuant to section 5 of the Telecommunications Act 1987 (the "Act") for the purpose of promoting a competitive market in international telecommunications services in New Zealand.

6. Section 5A(a) of the Act, as inserted by the Telecommunications Amendment Act 1988, makes it an offence for any person knowingly to provide incorrect or misleading information for the purpose of obtaining or maintaining registration. Section 5A(b) makes it an offence to fail to comply with any term or condition of registration. Offences attract a maximum fine of $20,000, and, if the offence is continuing, a further maximum fine of $2,000 per day.

7. Section 5B makes it an offence to provide services which are subject to registration without first having obtained registration. An offence attracts a maximum fine of $100,000, and, if the offence is continuing, a further maximum fine of $10,000 per day.

General Policy Objectives

8. The 1994 regulations are intended to promote a competitive market in international telecommunications services in New Zealand. In particular, they recognise that New Zealand's competitive suppliers of international telecommunications services are potentially vulnerable to the actions of overseas operators who may be in a position, on account of barriers to market access in their own markets, to play one supplier off against another, to the detriment of telecommunications users in New Zealand. The 1994 regulations are not intended to serve the interests of operators per se, but rather the interests of their customers in New Zealand.

9. The 1989 regulations achieved this purpose by requiring all registered operators to comply with certain conditions in their contracts with the same overseas operator, e.g. "parallel accounting" and "proportionate return of traffic". In reviewing the 1989 regulations, the Ministry took the view that this requirement was unnecessarily onerous given that by far the bulk of New Zealand's telecommunications traffic was exchanged with countries where competitive suppliers were operating. In addition, the effect of the regulations was to stifle resale activities which could act as a spur to competition.

10. The 1994 regulations are an example of "regulation by exception". Registered persons are permitted to negotiate freely with overseas operators. However, the Chief Executive may require the adoption of certain conditions in contracts with overseas operators where the Chief Executive considers that this would promote a competitive market for international telecommunications services in New Zealand and serve the interests of the users of such services in New Zealand.

11. The 1994 regulations were amended by the Telecommunications (International Services) Amendment Regulations 1997, in order to comply with New Zealand's commitments on market access contained in its offer to the World Trade Organisation (WTO) Group on Basic Telecommunications, under the General Agreement on Trade in Services (GATS). The effect of the "1997 amendments" is to revoke Regulation 5(1) therefore removing the power of the Chief Executive to determine whether or not to register operators providing services using leased circuits.

12. The 1994 regulations came into effect on 1 March 1995. The 1997 amendments came into effect on 16 October 1997.

13. The 1994 regulations have been amended with effect from 1 July 1999 by removing the $10 000 annual registration fee. This revised compliance statement reflects reduced compliance requirements upon registered operators.

Application for Registration

14. Applications for registration should be submitted in writing to the Advisor, International Telecommunications Policy, Resources and Networks Branch, Ministry of Economic Development. There is currently no application form, and a letter is sufficient for application purposes.

15. Persons seeking registration should provide:

a brief description of the entity seeking registration, including full legal name and place of business, present business operations, ownership structure etc;
a full description of the international telecommunications services it is proposed to provide, viz.:

a description of facilities to be established or already being operated or maintained;
a list of proposed or existing traffic routes, together with a list of proposed or existing agreements with overseas operators;

an application fee of $1,000 in the form of a cheque made payable to the Ministry of Economic Development.

16. Persons providing or proposing to provide public switched telecommunications services should provide information on expected or actual inwards and outwards voice traffic volumes on each proposed or existing route.

17. Persons proposing to provide services using leased circuits (e.g. resellers) should provide information on proposed or existing routes for such services.

18. Each application will be acknowledged, and a receipt will be issued for fees banked.

19. The above list is not exhaustive, and further information may be requested, pursuant to regulation 4(2)(b).

Registration

20. Applicants seeking registration in respect of public switched telecommunications services and services provided using leased circuitswho meet the requirements of registration pursuant to regulation 4(2) will be registered and notified accordingly. Notice of registration will be published in the Gazette as soon as practicable after registration, as required under regulation 5(3).

21. The Ministry's aim is to deal with applications within four weeks of receipt. This period will be deemed to have commenced when all relevant information requested by the Chief Executive has been received.

Non-Registration

22. Applicants who, in the Chief Executive's opinion, do not need to be registered, will be notified accordingly.

Revocation of Registration

23. Regulation 8 enables the Chief Executive, in certain defined circumstances, to revoke the registration of a person registered under the regulations. The Ministry will reconsider any decision to revoke registration, on request.

Information Requirements

24. As part of the ongoing administration of the regulations, registered operators providing public switched telecommunications services will be required to supply the following information to the Ministry:

any significant changes in the information supplied at the time of application (e.g. changes in ownership, proposed traffic routes and services etc).

25. The Chief Executive will expect this information to be provided within one month of the change in details.

26. The Ministry may also, from time to timerequest other information from registered operators, including traffic data, accounting rates, settlement rates, termination charges or other information related to the handling of international telecommunications traffic.

Handling of Information Supplied

27. Information provided to the Ministry under the regulations will be treated in accordance with the requirements of the Official Information Act. Subject to the requirements of the Act, it will be treated confidentially and will not be disclosed to third parties, except when appropriate in an aggregated form for statistical or analytical purposes. Information on accounting rates will not be shared among registered operators, except where this is necessary for compliance purposes.

28. Information obtained from registered operators will not be disclosed to other registered operators, except where this is necessary for compliance purposes. It is the Ministry's expectation that the need for such disclosure would not arise unless an additional condition had been imposed, pursuant to regulation 7.

Additional Conditions

29. Pursuant to regulation 7, the Chief Executive may impose one or both of two additional conditions on registered operators. In determining whether or not to do so, the Chief Executive must have regard to the criteria set out in regulation 7(2).

30. This power will be exercised on a case by case basis, and in a consultative manner. The Chief Executive will strive to build a consensus as to any action to be taken among interested parties. However, in the absence of agreement, the Chief Executive has the right to impose a particular course of action, as provided for under regulation 7(1).

31. By way of example, the Chief Executive will take a special interest in:

situations where significant volumes of telephone traffic are routed over international leased circuits;
situations where registered operators use, or have imposed on them, different accounting rates and/or methods with an overseas operator, and receive from that
operator shares of traffic that are not in similar proportion to their shares of total traffic from New Zealand to that operator;
situations where a registered operator may derive an unfair advantage through its association with an overseas operator with an ownership interest in the registered operator, e.g. through transfer pricing;
situations where a registered operator receives access to an overseas operator on terms and conditions that are considerably more favourable than those offered to another registered operator in like circumstances.

32. The Chief Executive takes the view that "similar proportion" as used in regulation 7(1)(b) means a proportion that is:

within five percent of the share of traffic that can be expected by a registered operator from an overseas operator based on the share of that operator's traffic transmitted to the overseas operator, within any six month period in the first two years of the commencement of service; and
within two percent in any six month period after two years of the commencement of service.

33. It is the Chief Executive's expectation that consideration of the use of this regulation will come about as the result of a specific complaint from a registered operator. But this may not necessarily be so, and the Chief Executive is not prevented from acting on his/her own volition, or in response to the complaint of a person not registered under the regulations.

34. Requests for the Chief Executive to consider action under regulation 7 should be made in writing. They should set out which of the conditions under regulation 7(1) should be applied, to whom, and the reasons for this.

35. Requests will be acknowledged. It is intended that they will be copied to all registered operators for comment within a specified period, depending on the urgency of the matter, but generally comments will be required within two weeks. The Chief Executive will take all relevant comments into account in making a decision, and the decision will be communicated to all registered persons in writing. It is envisaged that this process will be completed within a month of receipt of the complaint. Registered operators affected by such a decision may request the Ministry to reconsider its decision.

36. Formal, public hearings are not envisaged, although meetings with interested parties may well be desirable.

37. Registered operators should ensure that in entering into contracts with overseas operators, provision is made for the possible need to vary their contracts in accordance with any decisions made by the Chief Executive pursuant to regulation 7(1).

38. In the event that the Chief Executive considers it necessary to impose one or both of the conditions set out under regulation 7(1), the conditions will be defined at the time, taking into account the need to prevent any significant harm to the interests of telecommunications users in New Zealand.

Fees Policy

39. Pursuant to regulation 4(3) an application may be made in respect of single or multiple telecommunications links.

40. Persons wishing to provide public switched telecommunications services or services based on leased circuits need only make one application regardless of subsequent changes to the routes on which services are provided since the mix of routes is not relevant to whether or not registration is obtained.

41. The Chief Executive will keep under review fee levels established under the regulations. Adjustments will be proposed if fee levels significantly under or over compensate the Ministry for the costs of administering the regulations.

Particular Services

42. The Ministry of Economic Development is not in a position to give legal advice on the application of the regulations in particular situations. However, the following information is provided for guidance as to the policy intention behind the regulations in respect of certain services.

43. In general, the regulations are not intended to apply to companies which lease international circuits primarily for their own telecommunications requirements but who also sell spare capacity to other users (resellers). However, the application of the regulations would depend, inter alia, on the extent to which the provision of services was based on the operation of the companies' own facilities in New Zealand, and whether this involved direct agreements or arrangements with overseas operators.

44. In the case of all services provided using leased international circuits, the regulations would not be applicable in any circumstances unless such circuits were interconnected to public switched telecommunications networks at both ends of an international link.

45. The regulations are not intended to apply to "call-back" services since such services are unlikely to be detrimental to user interests in New Zealand. The definition of the word "facilities" is designed to exclude from the scope of the regulations those services that merely involve a marketing or billing operation in New Zealand. In the case of call-back services into New Zealand, i.e. a switch in New Zealand to which overseas callers have access in order to originate international calls in New Zealand, the regulations would not be applicable unless, inter alia, the services involved were provided to persons in New Zealand. In the case of call-back services out of New Zealand, i.e. a switch overseas to which New Zealand users have access in order to originate international calls from abroad, the regulations would not be applicable unless, inter alia, the services involved the operation of facilities in New Zealand.

Administration of the Regulations

46. The regulations are administered by the Resources and Networks Branch of the Ministry of Economic Development.

47. All matters concerning the regulations should be addressed to:

	Advisor, International Telecommunications Policy Telecommunications and Postal Policy Group Resources and Networks Branch Ministry of Economic Development PO Box 1473 Wellington New Zealand
	Tel:	+64-4-472 0030
	Fax:	+64-4-473 7010

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Printed: 24/11/2009

Compliance Statement: Telecommunications (International Services) Regulations 1994

Contents

Purpose