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Telecommunications Service Obligations (TSO) Review


The Telecommunications Service Obligations (TSO) regulatory framework established by the Telecommunications Act 2001 is the regulatory mechanism which enables services to be made available to supplement the range of services that are commercially available.

On 16 January 2007 the Minister of Communications issued a terms of reference for a review of the TSO framework. Subsequently, a discussion document was released on 20 August 2007 for the review which is to assess if there is a case for making changes to ensure that basic telecommunications services continue to be made available at affordable prices to residential users.

The focus of the review is the Local Service TSO which embodies the original Kiwi Share Obligations for ordinary local telephone service that were made part of the TSO framework established in 2001 when the Telecommunications Act 2001 came into force.

The review is to be undertaken on a "first principles" basis. However, fundamental aspects of residential local telephone service, such as access to emergency calling and a free local calling option, will continue. An up-to-date effective TSO regulatory framework is a key element of the government's telecommunications strategy.

The discussion document canvasses the following main issues:

  • what aspects of TSO local telephone service need updating to take into account new technology, user expectations and market changes;
  • in the light of experience, the case for changing the way that the Local Service TSO Provider is compensated, including whether to introduce contestability for determining who can access TSO subsidy funding for supplying service;
  • how should price changes be applied and who should be eligible for TSO local service;
  • what emergency call service requirements should apply going forward and the case for placing these into a separate TSO;
  • assessing the merits of introducing a broadband TSO to address shortfalls in the availability of broadband services in rural areas.

    Telecommunications service providers and telecommunications users are invited to provide their views on the case for change on the issues raised in the discussion document.

The date when submissions are due on the TSO discussion document has been moved out to 5:00pm, Monday 15 October 2007.

Supplementary information in support of submissions may be provided by respondents after this date. However, there is no guarantee that such information will be considered in the Ministry’s policy analysis.

Background

Universal telecommunications services for all New Zealanders are critical for enabling economic growth and the development of a knowledge-based economy, as well as providing essential social benefits and timely access to emergency services.

When the Government privatised Telecom in 1990, the crucial importance of local telephone service for New Zealand households was recognised through KSOs that Telecom agreed to at that time. The KSOs require Telecom to ensure the availability and affordability of basic telecommunications services for New Zealanders.

The KSOs have enabled New Zealanders to retain a degree of control over a network that generations of public funding had developed. It is unlikely that the privatisation of Telecom would have transpired without the assurance offered by the KSOs. Aspects of the KSOs were re-negotiated during 2001 as part of the Government's review of the telecommunications regulatory environment.

The telecommunications services obligations in the original KSO were subsumed into the Local Service TSO Deed which reinforces the principles outlined in the original Kiwi Share agreement by clarifying requirements (including recognition of dial-up Internet access) and setting service standards.

What is included in "basic telecommunications services" has continued to evolve since the KSOs were first agreed. In 1990, the emphasis was on residential telephone voice call service. By 2001, it was recognised that dial-up internet calls were an important feature of the basic service. In 2007, it is pertinent to ask the question of whether there should be TSO requirements for broadband access.

The TSO framework has two essential features:

  • enables the supply of certain telecommunications services which would otherwise not be made available commercially; and
  • enables levying the telecommunications industry to recover the subsidisation cost for the supply of TSO services.

The TSO for local residential telephone service is based on Telecom, as TSO Provider, supplying ordinary telephone service under a specific set of conditions. This includes continuing to offer the option of free local calling for residential customers.

The Government's 2006 strategic review or "stocktake" of the telecommunications sector identified that accessibility of broadband services for users in rural areas could be adversely impacted by the regulatory reforms. The TSO review was signalled as one of a range of measures necessary to future-proof the regulatory regime to technology change and market dynamics. In particular, the Local Service TSO needs to be updated to reflect increasing expectations for telecommunications access services and to ensure the wider population can benefit from technology enhancements.

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