The move is part of a package of reforms announced by New Zealand's communications minister David Cunliffe late yesterday and aimed at gaining the country a better broadband ranking compared with other developed nations.
As is the case in Australia, the NZ government is also placing additional restrictions on the nation's incumbent telco as well as attempting to stimulate investment in broadband.
"Today's package includes ... regulatory action such as information disclosure, accounting separation of Telecom's business operations and an enhanced Commerce Commission monitoring role in order to ensure improved competition," a statement issued by Cunliffe said.
In addition, constraints on Telecom NZ's existing wholesale broadband "Bitstream" service supplied to rival telcos will be removed, allowing among other things the provision of so-called "naked" DSL which doesn't require customers to purchase fixed-line telephony services to get broadband.
Naked DSL is widely available internationally but is not yet sold in Australia.
The NZ government will conduct a review of public sector investment in telecommunications infrastructure "to encourage a whole of government approach".
In addition it will review Telecom NZ's ability to "reduce local prices solely in response to new competing infrastructure investment", expand other government funding and attempt to ensure "competitive access" to the radio spectrum needed for wireless communications.
"We are continuing to look at whether additional measures are waranted, such as the structural separation of Telecom's retail and lines operations," said Cunliffe.
Telecom NZ immediately reacted negatively to the government's package of reforms, saying in a statement to the Australian Stock Exchange that the reforms told rival telcos to cancel investment plans and instead rely on regulation.
However, reaction was more positive from competitors, including TelstraClear chief executive Dr Allan Freeth, who described the decision as allowing true competition in New Zealand for the first time.
"The government set itself a bold target of having New Zealand in the upper quartile of OECD nations for broadband uptake. This decision gives Kiwis a fighting chance of getting there," Freeth said.
Foreshadowing what the company had in mind for the market, Freeth added, "We'll be dusting off plans we shelved a couple of years ago and look forward to seeing what we can do for customers."