Telco bill and regulatory environment for next-gen networks

IDC analyst Rosalie Nelson’s concerns about the regulatory forbearance period

IDC research director, Telecommunications, Rosalie Nelson questions whether bypassing the regulator during the building phase of the Ultra Fast Broadband network, will set the right regulatory environment for next-generation networks.

The controversial forbearance period, which would mean the Commerce Commission has no oversight into pricing on the UFB network until 2020, took a step closer to becoming law yesterday. The majority of the finance and expenditure select committee recommended the Telecommunications Amendment Bill proceed to a second reading in parliament, albeit with some changes.

The rationale for the forbearance period is explained in the Committee’s report: “To be able to offer prices that are competitive with the current copper network from the outset, those who bid to supply services through the UFB require some certainty that prices negotiated would not change during the period in which the fibre network is built”.

But Nelson wonders why, in a country with an election cycle of just three years, it is necessary to bypass the independent regulator. Especially given the highly-politicised process of selecting private partners for the UFB, because in the new network the government will be both investor and price-setter.

“There are those who will argue that our regulator has to get ministerial approval for things,” she says. “We get a lot of raised eyebrows internationally – why are we bypassing the independent regulator? If there are issues and challenges with the role of the Commerce Commission, with the breadth of its current mandate ... we need to be making changes there to support a next-generation environment.”

Nelsons says the current process for selecting UFB has raised industry concerns because it is a competitive tender and therefore not open to public scrutiny.

“There is an absence of information. Sometimes we hear it being said that if the industry could see what the terms and conditions were around this, there would be a lot less concern. But we don’t have that.”

Nelson says a next-generation regulatory environment would take into account issues of mobility, what happens when an industry is structurally separate (that is, the owner of the network can’t provide retail services, as will be the case with UFB), and how to create regulatory settings that promote investment in both the wholesale and the retail environment.

“We need to have a rational debate,” says Nelson. “So much of the debate gets really polarised by vested interests and it is quite hard to find a middle line through it all.”