The Government plans to reform the Telecommunications Service Obligations (TSO) levy to help fund its ambitions for rural telecommunications.
Communications and Information Technology Minister Steven Joyce announced this morning that the Government wants to help fund rural broadband through a more transparent and effective industry levy than the current TSO levy.
This will be to top up a direct Government direct contribution of $48 million and further interim funding of up to $52 million, to make up the $300 million rural broadband initiative announced earlier.
Joyce says the Government plans to replace the existing TSO industry funding with a more transparent contestable industry-wide mechanism that focuses on developing rural telecommunications.
But he stressed this will not affect the TSO obligation, which includes free local calls or further loosen the rules around foreign ownership of Telecom.
However, Joyce says he is concerned by the lack of transparency around where the $70 million Telecom gets from the TSO levy each year in compensation for servicing rural customers, is spent and whether it in fact benefits these customers.
“The existing TSO levy has been in place since 2001 and has been a source of considerable controversy within the industry. A recent review of the TSO had identified that the current methodology for assessing how much the TSO commitment was costing Telecom a year was flawed.”
The current TSO levy methodology counts the costs Telecom incurs but does not include the full range of benefits Telecom derives from the TSO.
“The government is proposing to change the methodology for how much Telecom is compensated for uneconomic customers. By counting both the costs and the benefits of the TSO it is likely that the TSO levy will reduce to zero for the foreseeable future,” Joyce says.
The new telecommunications development levy to replace the TSO levy would look to recover around $50 million per annum over the next six years - about $20 million less than is currently the case.
TUANZ has long called for the TSO to be transformed believing it is not delivering the best outcomes for rural communities who have long suffered from poorer connectivity than their urban counterparts, but who have the most to gain from better broadband.
The Government has released two discussion documents setting out the details of the its rural broadband initiative and a proposed reform of the TSO, including the proposal to establish a telecommunications development levy, which are available at www.med.govt.nz/rural-broadband and www.med.govt.nz/tso.
Submissions on both papers close at 5.00pm on Friday 30 October 2009.