NZ Government's FTTH plan could breach WTO rules

Stuart Corner
Tuesday, 02 November 2010 13:44

IT Policy - Regulation

New Zealand's Internet industry association, InternetNZ, has warned that the New Zealand Government's plan to quarantine its planned FTTH network from independent regulatory oversight could put the country in breach of its international trade obligations.

The Government has set up a company Crown Fibre Holdings, that will contract with private sector suppliers for specific regions to rollout its Ultra Fast Broadband network (UFB) with the aim of connection 75 percent of New Zealand homes to fibre within 10 years.

In July communications minister Steven Joyce announced plans for a 'regulatory holiday' for the successful bidders to ensure that they achieved a commercial return from the early days of the network. Joyce said: "[Network access] prices will be set by Crown Fibre Holdings through negotiations following the tender process, and there will be limited scope for regulatory intervention to alter those prices while the industry is still immature. However, there will be safeguards in place to ensure that effective competition will develop."

According to InternetNZ, "This 'regulatory forbearance period''¦seems to be inconsistent with New Zealand's obligations under World Trade Organisation rules."

InternetNZ has released a legal report setting out the issues in-depth, with CEO, Vikram Kumar, saying "The legal obstacle to the Government's proposed approach presented by the WTO issue identified in the report is not one that can be ignored. WTO rules require an independent regulator for telecommunications. The Government's approach to replace independent regulation with contracts between fibre investors and Crown Fibre Holdings does not pass that test."

According to Kumar, "The WTO obligations were specifically set in place, among other reasons, to prevent governments benefiting their own telecommunications investments at the expense of private interests. With the UFB being a major new investment in telecommunications by government, the arguments that led to the WTO's strong rules around independent regulation are as important as they have ever been."

However, Kumar insists there is a simple solution. "The Government should signal that it will not seek to restrict the Commerce Commission's ability to regulate fibre networks by amending the Telecommunications Act. Communications minister Steven Joyce would continue to retain ultimate decision-making authority over any attempts to regulate fibre services under the current law.

"He can make public statements about how he would deal with any such advice, which would achieve the same practical outcome as a legislated regulatory holiday without the problems created by the current approach."

Kumar added: "The Government can also indicate its strong preference for stability and certainty for fibre investors to the Commerce Commission through a statement of Government policy. Taken together with the minister's view about the need for regulation, certainty for investors is the outcome - and the WTO problems identified in this report won't be an issue."