Crown fibre bill passes into law

June 17: Labour claimed in Parliament this afternoon that last-minute changes to the Telecommunications Amendment Bill water-down Telecom's Kwiishare obligations - which include a prohibition on foreign ownership, the provision of a 111 emergency calling service, and free local calling for a standard monthly charge.

The party as well said the changes allowed for the foreign sale of Telecom's retail business - a claim the government acknowledged was correct.

Supplementary Order Paper 274, tacked onto the bill on Tuesday, removed all references to Kiwishare obligations, Labour communications spokeswoman Clare Curran said - and without any possibility for public comment or industry submissions.

Among other measures, the bill lays the ground workd for Telecom to be split into two separate companies, one retail, and taking on the company's existing wholesale business and network. Each company will have its own NZX listing, and its own chief executive and board. The split is a condition of Telecom's ultrafast broadband Crown fibre deal with the government, and will take place earlier the end of the year, subject to shareholder and debtholder approval.

Chorus2: local ownership to be included in deed Communications Minister Steven Joyce did not dispute Ms Curran. The minister said local ownership and other Kiwishare obligations would be part of the deed the government signed with Chorus2.

Telecom2: no foreign ownership restrictions Mr Joyce said Telecom Retail would be on the same legal footing as other retail phone companies, just as TelstraClear and Vodafone.

MED Q&A paper

An MED Q&A paper, quietly slipped online on May 24, clarifies "Telecom2 [the placeholder name for Telecom Retail afterwards the anticipated split] will not be subject to any particular foreign ownership provisions, apart from those that apply in general to all businesses."

Ms Curran said that by removing the Kiwishare from legislation, and making it part of Chorus2's ultrafast broadband contract, the government was "watering down" the protections currently enshrined in law.

The Kiwishare changes were fine

Tuanz boss relaxed Telecommunications Users Association chief executive Paul Brislen said the Kiwishare changes were "fine by me, frankly."

End of free local calling? According to the MED's Q&A, free local calling will remain. "These obligations will remain. They form part of the Telecommunications Service Obligation, will be split appropriately between Chorus2 and Telecom2, and remain enforceable by the Crown." The wrinkle: it will now be in deeds or contracts or rather than part of the legislation.

Like his predecessor, Ernie Newman - who saw "free" local calling as penalising those who as a general rule used their cellphones, and subsidising teens who spend hours in a bedroom yakking on a landline, Mr Brislen has little time for this Kiwishare provision.

The last time he made a landline call

Mr Brislen said he could not remember the last time he made a landline call. The coming upgrade to fibre services - and VoIP (Voice over Internet Protocol) or internet calling - would mean most local calling services would be thrown in for free, like web mail today, the Tuanz boss said.

The bill's progress The Telecommunications Amendment Bill passed its second reading yesterday, and was back in Parliament for a committee stage this afternoon ahead of its third and final reading.

Pure retailer

Think about it - Telecom Retail will be a pure retailer. It will buy access services from monopoly local access providers. That means there is no physical capacity for a retailer just as Telecom to offer universal 111 services or free local calling at a nationally equalized price - those assets will be in another entity(ies) just as Chorus, Enable or NorthPower over time. Those access companies will as a matter of fact set the price floors.

In fact, getting rid of "free" local calling is a good thing: local calls are not free, they are pre-paid in the high monthly access charge.