Early opinion UFB

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The government has made its mind up and it is all looking very good for future generations of New Zealanders.

Hon Steven Joyce announced this morning the Ultra Fast Broadband Initiative

The Ministry of Economic Development also issued a 19 page document providing details.

On the regulation front (read our earlier analysis) the government has signalled an interesting approach: (reproduced from Ministry document)

87. The draft proposal of 31 March 2009 did not envisage the government making any specific steps affecting LFCs' regulatory operating environment. LFCs will be subject to the telecommunications regulatory regime established by the Telecommunications Act 2001 and the Commerce Act 1986.
88. Taking into account the comments in submissions on the draft proposal, it is apparent that there is an element of regulatory uncertainty facing LFC investors. However, on balance, the government has concluded that the risk of price and/or non-price regulation being introduced in relation to services provided by LFCs is reasonably low in the short-to-medium term.
89. This conclusion is supported by the fact that the government is putting in place up-front design arrangements for LFCs that are intended to give ex-ante effect to many of the regulatory treatments that are current best practice in the communications sector. These include the restriction on retailing, retail ownership, requirements to provide specified open access products, and equivalence and transparency obligations.
90. The government does not consider that up-front price regulation is necessary ordesirable. Instead, prospective partners will be required to set out their proposed prices for products, which they will be required to commit to. This requirement, in combination with ongoing independence, equivalence and transparency requirements, is likely to impose a level of discipline that is appropriate for nascent LFC businesses.
91. In order to provide some comfort to investors in LFCs, the government will transmit a statement of economic policy to the Commerce Commission pursuant to section 19A of the Telecommunications Act 2001.
92. This is a non-binding statement that the Commission must take into account, among other factors, when making decisions under the Telecommunications Act 2001.
93. The following draft text indicates the likely content of such a statement:
"It is the economic policy of the government that decisions relating to the regulation of telecommunications services provided on ultra-fast broadband access infrastructure should take into account the risks to investors inherent in providing such services and deploying such infrastructure, and promote efficient and timely investment at the deepest levels of infrastructure, in addition to promoting competition for the long-term benefit of end-users of telecommunications services in New Zealand."
94. In addition, the Commerce Commission is considering what steps it could appropriately take in support of providing regulatory certainty to potential LFC investors. Such steps could include, for example, promulgation of a statement of regulatory principles relating to LFC networks.
95. Some submitters expressed concern about the effect of the existing regulatory framework for electricity lines companies (applying under the Commerce Act 2001) and specifically the impact that the framework might have on the incentives of lines companies to invest in broadband businesses. The government understands this concern, but does not consider that it is appropriate to pre-judge the outcomes of the Commerce Commission's current work on input methodologies for price regulated businesses. In reaching this view, the government notes that the input methodologies "must not unduly deter investment by a supplier of regulated goods or services in the provision of other goods or services."

We are pleased to see that the Commerce Commission is considering a "statement of regulatory principles" up front - a point we emphasised in our analysis earlier.




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