Regulatory Forbearance replaced

I blogged back in March on the Telecommunications Bill going through Parliament, and some of the issues around it which were causing concern.

Steven Joyce has just announced:

Regulatory forbearance on wholesale prices for the ultra-fast broadband network will be replaced with contractual mechanisms that would apply if the Commerce Commission regulates prices lower than those contracted, Communications and Information Technology Minister Steven Joyce announced today.

In announcing the move, Mr Joyce says that he had listened carefully to industry concerns in regards to the plan for regulatory forbearance over the 8 ½ year build period of the contract.

“While I think their concerns are more theoretical than real, given that pretty much everybody has been happy with the very competitive prices announced by CFH to date, we have been able to find an alternative solution which will give the infrastructure builders confidence to stay committed to their low capped prices, and customers confidence that they are will continue to get the best prices over that 8½ year period.”

This is an excellent outcome, and congrats to the Minister for devising it. It retains price certainity for investors (which means we get more fibre laid for $1.5b) but also leaves in place the security of the Commerce Commission to ensure consumers are not being over-charged.

If for some reason the Commerce Commission found prices should be lower than contracturally agreed (which is unlikely but predicting the future is difficult in such a innovative industry), then the Government bears the risk as the entity that entered into the contracts with the local fibre companies.

The Minister get big kudos for making the decision. I think it is also worth handing out kudos to the various ICT groups and Opposition MPs who pressed for changes. Both Labour and ACT MPs on the Select Committee were very receptive to pushing for changes.

I had been concerned that all the good work the Government was doing in investing the $1.5b into fibre would get over-shadowed by the arguments over the proposed regulatory forbearance period. This decision means all eyes will now go to whom will get the contract for the 85% of areas not yet allocated.

That decision is due in a matter of days, maybe weeks. And after that then there’s going to be a lot of work for people in digging up roads, putting in trench, laying fibre etc. The combined public and private spend will probably be $4 to $5b over the next eight years or so.

As we head towards fibe connected homes, I think we will see significant changes in society – many more professionals working from home, virtual offices for some firms, video-conferencing as common as TV,  movies and TV on demand etc, mass storage on the cloud etc. It’s an exciting future.