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Telecom's submission is unworkable - InternetNZ

Media Release - May 15, 2007 - InternetNZ has today advised the Government that it considers Telecom’s proposal for structural separation and changes to the regulatory framework as unworkable. The proposal is not a basis for further discussion, and advises the Government to continue forthwith with the operational separation process.

Deputy Executive Director Jordan Carter says Telecom's proposal cannot be accommodated by the Telecommunications Act amendments passed last year, and if accepted would dramatically weaken equivalence obligations."The Telecom proposal asks for a complete re-write of a regulatory framework that is only six months old. The required legislative changes would be substantial and complex, requiring substantially changed policy settings. They would take a year or longer to develop and enact."On top of that, Telecom's proposal would weaken the equivalence obligations, particularly for Telecom Wholesale, that are at the core of the model applying to British Telecom and the New Zealand model as proposed by the MED. Weaker equivalence would reduce the prospect of investment by newcomers, an outcome that nobody wants."Telecom's proposal seeks significant change to the way pricing of regulated services is determined, asking Government to set prices directly. It seeks to override other Commerce Commission processes around addition and deletion of regulated services. It asks to be granted a regulatory holiday to improve its investment returns - an approach not in line with the BT model and one that is opposed in UK and by the European jurisdictions “Telecom claims there is an issue with rate of return on assets. The pricing of regulated services under the Telecommunications Act are already calculated with investment incentives in mind to ensure a long-run future for these services,” said Jordan Carter.“Structural separation may well be useful in ensuring transparency around rate of returns and therefore InternetNZ supports it as a long term option. InternetNZ has endorsed structural separation in its previous submissions to Government. However, we cannot support it in the context of Telecom's proposal."Telecom is always free to propose a more workable structural separation after operational separation is under way. In doing so they need to respect their commitments made last year to accept a three-way operational separation along the lines applying in Britain, and proposed in New Zealand."We urge the government to continue with the operational separation process, taking account of the constructive comments made by many submitters. Telecom's model would chip away at the bottom rung of the Ladder of Investment, and that is not in the interests of New Zealand's Internet users,” Jordan Carter said.The submission is available here. ENDSFor more information contact:Jordan Carter, Deputy Executive Director04 495 2118, 021 442 649,

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