Telco review

Stuff reports:

There will be no sudden increases in basic phone and broadband prices after regulations get a clean sweep in 2020, the Government has promised.

In a relief for Sky Television, Communications Minister Amy Adams also said she had decided against introducing new regulations governing broadcasting competition, saying broadcasters were “facing more competition than ever”.

Yep. Competition is alive and well with almost a dozen competitors.

The rules that will govern the telecommunications industry will be largely rewritten to reflect the fact that the ultrafast broadband (UFB) network will be largely built by 2020 and will be something of a monopoly.

Adams said proposed the wholesale price of both copper and broadband would be set through a “building blocks” regulatory regime, similar to one that is used to regulate utility pricing in Australia.

The wholesale price of UFB is currently set out in contracts between network builders such as Chorus and the Crown, rather than through regulations.

Some telecommunications retailers have suggested the monthly wholesale price of copper and fibre broadband and phone services could fall by at least $10 a month after the regulatory reset in 2020, meaning cheaper prices for consumers.

Adams clarified she was not assuming the new rules would push up wholesale prices rather than reduce them. “Any time you bring in a new pricing methodology no-one really knows what the outcome of that will be.

This model is basically what most other monopolies have such as airport companies and lines companies. Effectively a maximum rate of return on their assets. It’s not perfect as utilities will then try and inflate their asset base, but it is considerable simpler than the current telco regulation where the Commerce Commission has to wok out the cost of each particular service, and then what the price for it should be.

Regulation is a necessary evil when it comes to monopolies. The best response is to have competition, but when it comes to utilities such as fibre networks,  there is no economic case for competing networks, so hence you need to have some price regulation of a monopoly utility.

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