A blog post from Andrew Cushen, Work Programme Director at InternetNZ
20 November 2015
Earlier this week, MBIE published the 43 submissions received on the Telecommunications Act review. There’s a lot of reading, for your pleasure, right here:
We’d completely understand if you don’t want to read all of these to get the gist of who thinks what; what matters and what may happen next. You may also look at that list and go “Too Long, Didn’t Read (or in our Internet parlance, TL;DR). For those of you that are in that camp, bless you; we get it. This summary is for you.
So here’s our summary of what some of these submissions are saying. In making a summary like this, here are some caveats:
- It’s a summary. It doesn’t do the complexity of some of these arguments justice. To see that, follow the links and have a read.
- It’s based off a skim read. There are thousands of pages of detail here, and while we are summarising we also need to take some time with this.
- It’s our initial reactions. We’ve included some responses here, but we’re still open to ideas, and see a big need for further discussion. We’ll come back to this later.
The TL;DR on the TL;DR - these are the big themes:
- The importance of vision. Everyone is speaking a similar language - that we want ubiquitous, high quality, reliable network infrastructure. Affordability for consumers and “industry sustainability” are themes that also come up in equal measure, depending on who is talking. There are a lot of shared objectives here.
- How, and when, to effectively regulate. Everyone seems to hate the current way of regulating prices, which is via determinations (process) and TSLRIC (pricing principle). Change is on everyone’s mind, but there is plenty to debate about how to do it.
- What role for the industry and self-regulation? The industry thinks they should have a chance to solve this commercially on their own. Suffice to say, that feels a bit like foxes designing hen houses.
- Building block models look good. Everyone seems to see some merit in continuing to explore BBM as a regulatory construct. Done right, this could balance the variety of interests well. There are a heap of design decisions to consider, as well as the time necessary to do them justice.
- What to do in mobile? There’s a split in the subs between Spark and Vodafone, who think that things are just fine, and everyone else who thinks they’re not. That’s probably telling.
- To unbundle or not to unbundle fibre – that is a question. Is it possible? Is it desirable? Will it lead to better outcomes for anyone? The LFCs and Chorus answer in the negative to those – a variety of others are more positive. Work to be done here too.
As for what we at InternetNZ think - well, that remains in our submission, available here:
Where to next?
There’s nothing we see in these submissions that changes our mind that proactive regulation of the New Zealand telecommunications market is the best outcome for all parties. Specifically, we want to see this process result in a clarified price regulation process and a regulated set of prices for telecommunications in place as of the 1st of January 2020.
There’s a lot of issues and detail that need to be considered in that process. We are adamant that the best way of exploring these issues is a multistakeholder, multi-stage one. That means that the variety of voices that have participated in this process so far have the means to continue to do so; it also means taking the time necessary to share, compare, contrast, discuss and debate these issues over time, to try for consensus and collaboration.
We’ve said that to MBIE too, and they agree that there needs to be more time for exactly that process of considered discussion to take place. They likely want to consider these submissions before committing to what happens next.
What that doesn’t mean is that we agree that the industry should be able to sail off in its own, private closed door process to tell everyone what the answer is. It’s a big theme in nearly all of the industry submissions, and it should be a worry to anyone that is interested in a price for telecommunications that is fair, reasonable and sustainable for all parties in this process – industry, providers, users and consumers alike.
So watch this space. InternetNZ is going to see this process through because it is vitally important to the future of the Internet in New Zealand. We’re going to do our damnedest to ensure that the perspective of the New Zealand Internet community is considered in that process. Stay tuned...
Into the details: the highlights of the other submissions, with our thoughts:
● Chorus: Has put in a monster, multi-document submission saying that they believe in “better broadband” for all New Zealanders. To get there we need to change the legislative regime in Telecommunications to allow them to make commercially led deals with a regulatory backstop if they get it wrong. That backstop should be in the form of a Building Block Model, like MBIE asked everyone’s opinion on and that’s commonly used in electricity and other industries.
Our response: Their commercial-led proposal is the sort of model that hasn’t always worked out well before (in fact we are not aware of any OECD country where this sort of approach has worked), and regulatory backstops can be awfully slow to put in place.
● Consumer: Likes what we have to say. Thanks guys :) But they also emphasise that there is the need to provide consumers in New Zealand with the ability to make informed choices about their telecommunications services through tools like TelMe; to have their complaints dealt with fairly through the Telecommunications Dispute Resolution Scheme, and to be represented in these complicated regulatory matters.
Our response: We couldn’t agree more!
● Kordia: They’re really worried about what it may mean to have telecommunications style regulatory solutions imposed on their broadcasting network business. The policy rationale of “convergence” doesn’t make sense to them in the context of their investments, customers and solutions. They also don’t want anything to change in terms of spectrum management, apart from stricter enforcement.
Our response: There’s clearly a few tricky bits here that we need to think about from a Kordia perspective. What do we need from our increasingly legacy broadcast transmission networks? Isn’t it just in the same job as the other players, shifting 1s and 0s from place to place? Why should it be treated differently?
● The Local Fibre Companies - Enable, Northpower and UltraFast Fibre: They’re concerned that if their new asset bases are going to be regulated, then there is a tricky calculation to be done about what their assets are worth. That valuation is a pretty arcane piece mix of legal thinking and economic mathematics, and they share their views on how it should work out. Surprise surprise, they (like Chorus) also favour a regulatory backstop rather than proactive regulation. They, like Chorus, don’t like fibre unbundling as they think they’re innovative enough and it will be too hard and cost too much.
Our response: A bit like what we think of Chorus’ - these ideas haven’t worked out so well in the past. It all feels a bit “trust us - we’ve got this”. They are obviously taking this process massively seriously given the incredible investment they’ve made at this stage in the process - there is a lot of detail to consider here.
● Local Government New Zealand: They’re keen on seeing great telecommunications networks reach out to as many New Zealanders and regions as possible. They see merit on a BBM approach, but caution about some of its complexity. They’re concerned that despite MBIE’s statements about mobile competition, that there remains some severely underserved areas in New Zealand. And they think copper to fibre migration could be a good idea.
Our response: It’s great that LGNZ is participating in this process, as there’s a powerful story to be worked through about regional access to and use of the Internet. They’re making some interesting points around how to drive to those outcomes.
● M2 New Zealand (AKA CallPlus, AKA Slingshot, AKA Orcon, almost really just all Vocus these days): Their sub seems pretty focussed on three big issues. Firstly, competition in mobile would be taken up a notch by regulation that better enabled Mobile Virtual Network Operators to get fair deals and compete with the big guys. Secondly, that any regime needs to take carefully into account the importance of Retailer investments, as in a fibre world they’re likely to be where differentiation, competition and innovation happen for consumers. And thirdly, that the main risk to be avoided in any regulatory debate is over-pricing network assets that drives up costs to Retailers and consumers.
Our response: MVNOs have worked well elsewhere, and it is an anomaly that they don’t work here. Retailers and consumers do deserve a fair share from any regime. And overpricing is a worry of ours too.
● Microsoft New Zealand: We’ll just quote them: “Microsoft strongly encourages the Government to adopt forward-looking policies that reflect the changing and dynamic marketplace that has been fostered by the innovative Internet ecosystem.”
Our response: Hear hear.
● Radio New Zealand: A short sub that questions what the problems are that are trying to be solved, and makes some good points that ubiquity in high-speed, affordable and reliable connectivity is an awfully good outcome to target in this process.
Our response: We share the concern about vision from the Government here, but wouldn’t quite put it that way. The Government needs to be clearer about its priorities and how it balances them - but that’s what further discussion is for. That outcome though is something we certainly have in mind too.
● Sky Television: Sky doesn’t want to see broadcasting smooshed together with telecommunications, so really question the entire policy rationale behind this process. They also don’t think they should be liable for any Telecommunications Development Levies.
Our response: Sky is likely worried that pushing broadcasting towards telecommunications means the introduction of some interesting competition controls that start to look pretty challenging for our market-dominant pay TV provider. The challenge is that despite them not liking it, their market is converging - so despite their reluctance to do so, this probably needs to be discussed.
● Spark: A big sub focussed on a number of key themes - stability, predictability, consistency. They want to see proactive regulation of fibre so they can rely on that stable price as the base of their retail offers. They think too that BBM is the way to go, but are worried that that is really hard work to implement - so they think we need an interim measure of some form of commercial solution as proposed by the TCF (see later). They want to see consistency between fibre and copper, and they don’t really see the need for any new “innovations” in mobile policy. A big theme for them is that the current regime works well, with some tweaking (for example, moving from TSLRIC to BBM).
Our response: This sub has a lot we can agree with around the outcomes we should be seeking for fixed networks. We’re not sure that it is as hard as they’re making out to do BBM right though - we have four years to do this before 2020 after all. Their aversion to mobile regulation though is as expected for one of the few providers in this market.
● Telecommunications Carriers Forum (AKA the NZ telecommunications industry): This sub reflects what the industry could share in, and is referred to already in a number of their members’ submissions. They think that implementing a new regulatory model will be really hard, so they can convene a process to have an “interim”, commercial-based price while the Commission does their fine work on BBM. They’re pretty keen to assert that they know best here: “It is the industry participants that are best suited to make decisions on future investment needs and technology choices.”
Our response: We disagree that the industry are “best suited” to working this all out on their own. That approach hasn’t led to the right outcomes before, and would be unlikely to do so this time. We also don’t share their pessimism about how hard it is for the Commission to work all this out in four years, so question strongly this interim “commercial” approach.
● Tex Edwards (AKA the guy that started 2Degrees before it became 2Degrees): Really does get the award for the most… unorthodox submission. However, there are some interesting points here from someone who knows way more than most about busting open competition in an otherwise less competitive market, including heaps of recommendations as to how the Commission can take mobile competition to a new level.
Our response: Tex has some interesting, if challenging, ideas here. His points around mobile network sustainability and co-location are worth reading.
● Trustpower: A surprisingly fulsome submission that goes against much of the rest of the telecommunications industry grain. They want to see competitive pressure increased in this industry through a more balanced approach to retailer and consumer interests. They think the Commerce Commission needs to take a more active role in the industry, ala the Electricity Authority, and think that the use of BBM is a way of doing that. They also point out how out of step New Zealand is on mobile.
Our response: Again, a lot we can see eye to eye on here from a different perspective than the rest of the industry. This is a really interesting sub from a provider that is saying something quite different and challenging - and we certainly agree with their objective of lifting competitive pressure in these industries.
● TUANZ: Our friends have put in a sub that also argues for the benefits of increased competition. They see merit in a BBM, but also see a lot more work to be done to understand this proposal and its ramifications for users. They also question what can be done to increase mobile competition, and muse that enhancing the prospect of MVNOs would certainly shake things up a bit.
Our response: We work quite closely with TUANZ while respecting the differences in our perspectives - so we see a lot to agree with here.
● 2Degrees: Another large submission that applauds the Government’s vision, and talks about their prescription on how to make it work. They, like many of their industry compatriots, think that more stability and predictability of outcomes in fixed line regulation is necessary, and that a BBM model could work well if the industry is allowed to commercially set things in the interim. Seeing a theme here yet? On mobile, they don’t see a need to enable MVNO, but they do see plenty of scope to enhance access to co-location, national roaming and other mobile network operator efficiencies.
Our response: On fixed, as above really. On mobile, they have a different perspective on things from everyone else though similar outcomes in mind - what would make mobile even more competitive is a theme that is coming through pretty loud in these subs.
● Vodafone: A pretty glossy sub, that speaks fondly of industry self-regulation and commercial solutions and recommends the TCF’s way of doing things. Seems to think that this can all happen relatively rapidly though, which is a good sign. Mobile is already “intensely competitive” according to Vodafone, so no worries there.
Our response: Again, as above. We’re a bit more pessimistic than Vodafone about the ability for the industry to solve this on their own. We’re more worried than they are about mobile too.