Ditch the TSO and bring back Homeline Economy!

, posted: 30-Mar-2006 11:44

One of the worst aspects of the poor telecommunications regulatory regime in New Zealand is the so-called Kiwi Share which has now been transmogrified into the Telecommunications Service Obligation or TSO.

Thanks to that, we pay $42.20 a month including GST for line rental, which includes "free local calling". That's $513.60 a year (yes, I know that customers in TelstraClear cable supplied areas pay less).

Is it such a good deal though? I guess if you're on the phone all the time, maybe there's some benefit to un-metered local calls. However, with mobile phones, voice over IP/Skype, and long working days, how many of us actually use landlines that much anymore? Mine's there mainly for the DSL, making that broadband service rather expensive (NZ$59.95 a month for 2M/192k, with a 10GB cap, plus $42.20 is $102.15 a month, or $1,225.80 a year).

In 2004, Paul Brislen wrote in the Herald how he "downgraded" to the Homeline Economy plan, which costs $25 a month. Calls are charged at 20 each for up to two hours. According to Paul, he made $8 worth of calls the month he tried out Homeline Economy. That's $33 a month in total, or a $6.85 saving.

Shortly after Paul wrote that story, Telecom yanked the Homeline Economy plan for new customers. Existing customers can still have it, but it costs $27.08 now, with calls charged at 20c each as per before.

Even with the increased monthly cost, I'd still go with the Homeline Economy as it'd save money for me.

The TSO doesn't just hit residential customers in the pocket however. The government hammered out a deal with Telecom that is now ensconced in law (and I wonder how much, if any, parliamentary debate there was around it) which says that other telcos in New Zealand have to subsidise so-called non-viable customers.

It's a noble idea, with the theory behind it being that everyone should have affordable phone service and low-speed data access (between 9.6 and 14.4kbit/s). In practise the TSO Levy has become a tax on competing telcos however, which depending on their annual revenue are hit up for millions of dollars a year - money which goes to Telecom. The TSO creates a bizarre distortion which means that if a telco like Vodafone is succesful and increases its revenues - by taking on Telecom's non-viable customers for instance - it will pay a higher TSO Levy.

The non-viable customer numbers are arrived at with the use of a rather old Windows program from the US Federal Trade Commission or FTC. It uses a Hybrid Cost Proxy Model and was designed to work out how much urban telcos in the US should subsidise rural carriers with. The model was developed in 1998 and the software, which is freely downloadable from the ftc.gov website, was last updated in 2002. The Commission uses input data provided by Telecom for its calculations. Telecom is also asked to work out how much it thinks the commercially non-viable customers cost, and it's amusing to see the huge difference between its figures and the ComCom's - which aren't small by any measure: in the 2002-2003 year, the ComCom worked out that there were 65,679 commercially non-viable residential customers. The cost for providing TSO to those was $56.78 million.

That's $864.50 per head and year, or $72.05 a month.

Telecom's figures were in the $450 million range however.

However, nobody knows exactly who those "CNVRCs" are, or where they're located. This means that other telcos can't take them off Telecom.

The funny thing is, in 2000, Telecom proposed to sell off its non-viable customers - I think the number then was around 300,000, but can't remember what the asking price was. The rather ineffectual communications minister at the time, Paul Swain, proposed that telcos would be able to tender for TSO provision to the non-viable customers... that didn't happen, presumably because nobody knows if they actually exist.

Update: Fixed an error above... calls on HomeLine Economy plans are charged at 20c each for up to two hours, not 20c/min like I wrote earlier. Appoloogies Embarassed !

Other related posts:
TDD vs FDD for LTE
Huawei TDD LTE demo aboard the Shanghai MagLev train
Apropos that new Telecom logo

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