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Free Local Calls May Get the Chop; TELEPHONE TALK

Posted on: Monday, 8 August 2005, 15:00 CDT

FREE local calls may be up for a rethink. The Kiwi Share, which guarantees such calls, will be reviewed by National and NZ First if they win office.

Labour pledges to keep free local calling but may review other aspects of the Kiwi Share. It looks like being one of the key issues for debate in the telecommunications sector.

It's a brave politician who has a go at the Kiwi Share and, on the face of it, scrapping free local calling hardly looks like a vote winner.

National telecommunications spokesman Maurice Williamson is not saying the party will scrap it, rather that the matter needs a serious review. "In my view the KSO (Kiwi Share Obligation) is still the barrier to that true market. And if we want really good investment and really good competition to apply, that's an issue that's got to be looked at at least very seriously."

The Kiwi Share has three legs. It requires Telecom to provide phone coverage to 99 per cent of the population at a charge no greater in rural areas than in urban areas, and not to raise the line rental by more than the rate of inflation each year. And third, local calls and dial-up Internet connections must remain free.

Mr Williamson said the Kiwi Share was a barrier to other players investing because free local calls gave Telecom a huge competitive advantage.

The Kiwi Share was put in place 16 years ago to make the sale of Telecom more palatable to the New Zealand public. It was worth reviewing whether the benefits New Zealanders had got from the Kiwi Share were outweighed by any benefits they might get from changes to telecommunications investment in New Zealand.

Asked if he was concerned Telecom would raise line rentals in rural areas, Mr Williamson said that would have to be looked at, but new technology might provide rural communities with better services.

National will find an ally in NZ First for reviewing the Kiwi Share, but NZ First communications spokesman Brent Catchpole said the party did not want to scrap it, only review it. Telecom had used the Kiwi Share to prevent competition in local services and had signalled the possibility of higher line rentals for rural customers if it were removed, he said.

"You have to wonder if these customers are as loss-leading as they are making out," Mr Catchpole said.

Mr Williamson asked if the Kiwi Share was a prop for Telecom's business rather than the drag it portrayed it as, because free local calls made other phone services such as mobile calls look expensive, said: "I'm not again going to take that position till we get some good analysis of it. But it is well and truly over time that that whole issue was looked at again."

Labour is sticking with free local calls. Communications Minister David Cunliffe said: "I do want to ensure the public that they will not lose their right to free local calling in the foreseeable future."

But other parts of the Kiwi Share may come under scrutiny if Labour is returned -- such as whether other players should contribute to Telecom's Kiwi Share losses from uneconomic customers. It may consider whether the free call service should go out to tender.

Mr Cunliffe said Labour had a $400 million digital strategy to stimulate demand for high-speed Internet services, with regulation through the telecommunications commissioner.

Mr Williamson faces the criticism that he did nothing for 10 years in the 1990s to tackle Telecom's monopoly -- something dealt with by a Labour government with the establishment of a telecommunications commissioner empowered to regulate Telecom.

Mr Williamson maintained that the telecommunications regime had not changed much for participants, but the industry supported the changes "so I've made it clear we wouldn't change much". He would establish the right to challenge the telecommunications commissioner's decisions in court.

Mr Williamson believed market forces could sort out most blockages to competition and remained reluctant to regulate. "The only time I'd look to regulating and intervening is if I could be convinced consumers would get something better as a net benefit, and remember if you take away property rights you could often be up for having to compensate someone for the removal of those."

But NZ First is not happy with Telecom's dominance. Mr Catchpole said the regulatory regime was not tough enough and his party would want to give the telecommunications commissioner more power.

United Future also has Telecom in its sights. It said it wanted other companies to be able to rent Telecom's network -- called unbundling of Telecom's local loop -- to tackle the slow take-up of broadband and the lack of choice and the high prices of telecommunications services.

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TELEPHONE TALK

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A rethink of the Kiwi Share is likely to spark most debate among telecommunications election policies because it could see the end to free local calls.

LABOUR

Use regulation where necessary to promote competition in telephone and telecommunications services.

$400 million Digital Strategy to encourage broadband development and New Zealanders to have digital skills.

NATIONAL

Review the Kiwi Share that ensures free local calls and that rural people pay no more than urban users for their telephone line.

NEW ZEALAND FIRST

Review the Kiwi Share and consider a replacement.

UNITED FUTURE

Re-examine requiring Telecom to open up its local network fully to other players -- unbundling.

Source: Dominion Post

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