Government Signals Future Directions for Regulation of Telecommunications, Electricity and Gas.

  • John Luxton

The telecommunications, electricity and gas industries provide key infrastructural services for the New Zealand economy. The Government is eager to maximise the contribution of these sectors to the overall growth of the economy. The Governments objective is to achieve efficiency in the provision of telecommunications, electricity and gas services in order to promote user benefits.

The Government continues to rely primarily upon competition to achieve its objectives in these sectors. The Government would be very concerned to see any firm restricting competition.

In particular, the Government would be very concerned to see a firm delaying negotiations, offering restricted terms and conditions or charging high access prices to its competitors for the purpose of restricting competition. The Government also considers it important that access arrangements be appropriate to the New Zealand environment and that they reflect the nature of the regulatory regime.

The Government considers that developments since the Privy Council decision demonstrate that the major telecommunications industry players do not support
the Baumol-Willig rule as a satisfactory basis for interconnection pricing. The Government considers that the Baumol-Willig rule has the potential to lessen competition, thereby limiting the rate of introduction of new products and services and lessening the benefits to users. The Government would be concerned to see the Baulmol-Willig rule being applied in future.

The signing of the Telecom/Clear interconnection agreement in March has resolved the major outstanding dispute in the telecommunications sector. This interconnection agreement may act as a framework for future interconnection agreements in that sector. Other telecommunications companies have recently signalled a desire to enter the New Zealand market.

In the light of these developments, the Government has decided to continue, for the time being, with the present regulatory regime based upon the Commerce Act. At this stage, the Government considers that alternatives to the present regime have not yet been developed to the point where they offer clear improvements to what has been achieved in New Zealand so far. Officials will continue to closely monitor developments and continue to evaluate any potential means of improving on the present regime and will remain in a position to recommend whether any action should be contemplated by the Government.

The Government expects owners of natural monopoly facilities to provide interconnection at terms that promote efficiency and deliver the benefits of competition to consumers. In addition, the Government expects both owners and potential competitors to negotiate in good faith to arrive at commercial solutions in a timely manner.

Where the Government is not satisfied that both parties are negotiating in good faith, within the framework, the Government will take additional regulatory action such as initiating a Commerce Commission price control inquiry or, if circumstances warrant, directly imposing price control.

In relation to the particular issue of the portability of telephone numbers between competing telecommunications carriers, the Government is concerned with the slow progress of the current negotiations between the carriers. The Government has requested a report from officials on options for facilitating number portability in the New Zealand telecommunications market.