NZ ComCom recommends Spark fixed-line deregulation

The New Zealand Commerce Commission (ComCom) has made a draft recommendation that three of telecommunications carrier Spark's wholesale voice services be deregulated, finding that there is sufficient competition in the market from Chorus, local fibre companies, and fixed-wireless operators.

The three fixed network services subject to the recommendation are local access and calling services; retail services; and retail services offered as part of a bundle.

"Having the resale services in Schedule 1 is not itself delivering competitive retail pricing or innovation in voice services," the draft recommendation says.

"Competition has been established, is increasingly effective, and is no longer dependent on access to the resale services. Chorus, the local fibre companies, and fixed-wireless operators all have the infrastructure to offer alternative wholesale voice services to RSPs.

"Competition from these wholesale alternatives will incentivise Spark to continue supplying the resale services. This competition will also constrain Spark from exercising significant market power in respect of the resale services."

The ComCom found that broadband services are now capable of providing voice services -- and for the "very small number" of premises not situated within a fast fibre broadband footprint, or covered by fixed-wireless services thanks to the New Zealand government's Rural Broadband Initiative or mobile services, Spark's services are already capped by its Telecommunications Service Obligation.

"Broadband networks now cover 97 percent of commercial and residential landlines, and provide competitive alternatives for delivering voice services. The remaining 3 percent are mainly remote voice-only customers, where Spark is the sole fixed-line wholesale provider," Telecommunications Commissioner Dr Stephen Gale said.

"However, for the majority of these remote lines, RSPs can use fixed-wireless services from either the Rural Broadband Initiative or based on extended mobile networks. A small number of outstanding consumers that can access voice-only lines are protected by a separate regulated price cap. Given this, our view is we should remove the resale services from the Act."

The ComCom has recommended a transition period of 12 months from the date of the government's order, to allow retail service providers the time to develop new business systems; adapt to using new wholesale inputs; migrate their customers; and renegotiate new resale contracts with Spark.

The New Zealand telco regulator had in July announced its decision to investigate the deregulation of wholesale access to Spark's fixed network, saying the presence of emerging competition from alternative wholesalers could warrant the removal of these services from the schedule.

According to Gale, the ComCom will also "monitor the provision of backhaul services", as they have evolved substantially over the past few years.

The ComCom first announced that it was examining whether to deregulate services in April, and is accepting submissions on its draft recommendation until October 17, with a final recommendation due in January.

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.

Spark reported full-year earnings before interest, tax, depreciation, and amortisation (EBITDA) of NZ$986 million, up 2.5 percent from the NZ$962 million reported last financial year, while Chorus reported EBITDA of NZ$594 million, down by NZ$8 million due to the ComCom's UBA pricing decision in December.