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Joyce: Government Releases Coverage And Funding Plan For Rural Telecommunications

Contributor:
Fuseworks Media
Fuseworks Media
Steven Joyce
Steven Joyce

The government has today released its coverage and funding plans for rural telecommunications.

Communications and Information Technology Minister Steven Joyce today released two proposals for public comment. These proposals focus on progressing the rural fast broadband initiative and reforming the Telecommunications Service Obligations (TSO) levy.

Mr Joyce says delivering fast broadband to rural communities is a priority for the government.

"We're proposing to fund the $300 million rural initiative through a combination of direct government funding and revenue from a more transparent and effective industry levy than the current TSO levy."

The government will provide a direct contribution of $48 million and further interim funding of up to $52 million. The remaining funding will be sourced by replacing the existing TSO industry funding with a more transparent contestable industry-wide mechanism that focuses on developing rural telecommunications.

Currently Telecom receives approximately $70 million per annum largely to compensate it for supplying local service to rural customers. This money is sourced from the industry via the TSO levy which is paid by market participants (including Telecom which contributes approximately 70%) on a market share basis.

Mr Joyce says he is concerned by the lack of transparency around where this money is spent and whether rural customers are benefiting from it.

"The existing TSO levy has been in place since 2001 and has been a source of considerable controversy within the industry. A recent review of the TSO had identified that the current methodology for assessing how much the TSO commitment was costing Telecom a year was flawed.

"I want to stress that changes to the TSO levy would not affect the TSO obligation, which includes free local calls. The idea is not even on the table. Likewise, there are no plans to further loosen the rules around foreign ownership of Telecom."

The current TSO levy methodology counts the costs Telecom incurs but does not include the full range of benefits Telecom derives from the TSO.

The government is proposing to change the methodology for how much Telecom is compensated for uneconomic customers. By counting both the costs and the benefits of the TSO it is likely that the TSO levy will reduce to zero for the foreseeable future."

The new telecommunications development levy to replace the TSO levy would look to recover around $50 million per annum over the next six years - about $20 million less than is currently the case.

"When the government tenders for the provision of rural broadband it will be an open and competitive process, with full transparency on where the money is spent," says Mr Joyce.

The discussion documents setting out the details of the government's rural broadband initiative and a proposed reform of the TSO, including the proposal to establish a telecommunications development levy, are available at www.med.govt.nz/rural-broadband and www.med.govt.nz/tso.

Submissions on both papers close at 5.00pm on Friday 30 October 2009.

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