NZ ComCom considering Spark fixed-line deregulation

New Zealand's telco regulator will look at the deregulation of Spark's fixed network services during its five-yearly review.

The New Zealand Commerce Commission (ComCom) is considering the deregulation of wholesale access to Spark's fixed network, saying there is sufficient competition to warrant the removal of these services from the schedule.

Specifically, the ComCom is examining whether to deregulate local access and calling services offered by means of a fixed telecommunications network; retail services offered by means of a fixed telecommunications network; and retail services offered by means of a fixed telecommunications network as part of a bundle of retail services.

"We consider that there are reasonable grounds to start an investigation into omitting this service from Schedule 1 of the Act," the ComCom said in its five-yearly draft decision on the Review of Designated and Specified Services under Schedule 1 of the Telecommunications Act 2001.

For the first category -- local access and calling services over fixed networks -- the ComCom said resale access has lowered the barrier for entry, ensuring greater competition. The regulator added that access to wholesale services such as the Ultra-Fast Broadband (UFB) network and baseband IP services now also compete with Spark's services.

In regards to the second service to come under review, retail services offered over a fixed network, the ComCom said the advent of IP-based services brings sufficient competition.

"We understand that the development of hosted IP-based services may provide increasingly competitive alternatives to ISDN/Centrex services by delivering similar functionality and features to business customers over broadband connections," the ComCom said in its draft decision.

"Hosted IP-based services can be delivered using wholesale services supplied by Chorus or LFCs."

For the last category under consideration -- retail services offered over a fixed network as part of a bundle -- the regulator said that while bundling remains important, Spark has a number of competitors now, which will continue driving prices lower without intervention.

"Wholesale services including Chorus' UBA and UFB-based wholesale services are becoming widely available and appear to compete with Spark's resale services. Our preliminary view is that due to the increasing availability of these types of competing wholesale services, the importance of resale access has diminished since our review in 2011," said New Zealand Telecommunications Commissioner Stephen Gale.

"We consider that the other regulated services should stay in Schedule 1 of the Act, because they remain important wholesale inputs that support the supply of vibrant and competitive retail voice and broadband services."

The ComCom decided there were no reasonable grounds to investigate the interconnection with a fixed Public Switched Telephone Network (PSTN), including the origination and termination of calls; Chorus' unbundled bitstream access (UBA); Chorus' unbundled copper local loop (UCLL); Chorus' unbundled copper low frequency service (UCLF); Chorus' unbundled bitstream access backhaul; Chorus' unbundled copper local loop network backhaul; Chorus' unbundled copper local loop network co-location; local telephone number portability service; cellular telephone number portability service; and co-location on cellular mobile transmission sites.

The ComCom is accepting submissions on the matter until May 23, with its final decision due on June 30.

The regulator is also currently reviewing the non-price terms of Chorus' UBA service, examining whether the copper service will fulfil the medium-term needs of consumers.

During the UBA review, the ComCom is exploring whether the service is future proofed; whether there are incentives for Chorus to continue investing in and innovating on its UBA; and whether the UBA service should be aligned with technical specifications of the service in the fixed pricing principles.

The ComCom had released its UBA final pricing determination in December, setting it NZ$50 million lower than that applied when Chorus separated itself from Telecom -- though NZ$120 million higher than the original pricing proposed by the ComCom.

In February, Spark reported a net profit of NZ$158 million, up NZ$11 million or 7.5 percent from last year's NZ$147 million, while Chorus recorded a net profit of NZ$33 million -- a sharp decline of 48.4 percent from last year's NZ$64 million due to the UBA pricing decision.