Supplementary Order Paper No 118

Explanatory note

This Supplementary Order Paper (SOP) amends the Telecommunications (New Regulatory Framework) Amendment Bill (the Bill). The Bill amends the Telecommunications Act 2001 (the Act). The main amendments to the Bill are set out in this note.

The SOP amends the definition of fibre fixed line access service in clause 4 to exclude from that term a telecommunications service provided in any part over a copper line and a service used exclusively in connection with that service.

The SOP inserts new clause 4A into the Bill, which replaces section 6 of the Act. The current section 6 requires the Commerce Commission (the Commission) to publish certain matters on its website and in the Gazette. Section 6, as inserted by this SOP, is similar to the current section 6, except it clarifies that only a summary of the matter must be published in the Gazette. The SOP inserts new clause 6B into new Part 2 of Schedule 1AA of the Act (as inserted by Schedule 1) to confirm, in case of doubt, that any notices given under section 6 of the Act before commencement were properly given. The SOP also makes amendments to the following clauses to simplify publication procedures:

  • clause 23, new sections 170, 172, 178, 179, 180, 181, 183, and 218:

  • clause 24B, new section 69SB:

  • clause 33, new section 233.

The SOP amends clause 7, new section 69AB, which requires the Commission to determine the geographic areas in which fibre services are available, to do the following:

  • require the Commission to make the determination before 1 January 2020 (even if the implementation date is shifted to a later date):

  • allow a specified fibre area to be declared in places where fibre services are available only to regulated fibre service providers or their related parties.

Once an area is declared to be a specified fibre area, Chorus may, on certain conditions, stop supplying copper services in the area.

The SOP amends clause 7, new section 69AE, which provides that certain deeds containing telecommunications service obligations cease to apply in specified fibre areas. The amendment allows for one of the deeds to continue to the extent that the deed relates to 111 call services.

The SOP amends clause 7, new section 69AG to provide that CPI adjustments to prices carried over from a standard terms determination must be made on 16 December in each year, starting from 2020. This is instead of making the adjustments on 1 January in each year.

The SOP inserts new clause 8A into the Bill, which inserts new section 85A. The amendment relates to the telecommunications development levy that is payable under subpart 2 of Part 3 of the Act. The amount of the levy is determined by reference to a liable person’s qualified revenue. The amendment excludes from this revenue certain revenue derived from broadcasting services. The change is a consequence of a change made at select committee to include broadcasting within the definition of telecommunications.

The SOP amends clause 13 of the Bill. Clause 13 amends Schedule 3 of the Act, which concerns the procedure for altering regulated services. Clause 1(3) of Schedule 3 requires the Commission to consider at regular intervals whether to commence an investigation into whether a particular service should no longer be regulated. The Bill currently provides that this does not apply to copper fixed line access services. The amendment in the SOP extends this carve-out to 3 other services provided by Chorus.

The SOP amends clause 23, new section 164 to insert a definition of Crown financing for the purposes of new section 170A (as inserted by this SOP) and new section 176.

The SOP inserts new section 170A into clause 23, which relates to determinations by the Commission that set maximum prices or maximum revenues for regulated fibre service providers. It requires that the prices or revenues must reflect, in respect of any Crown financing, the actual financing costs incurred by the provider.

The SOP amends clause 23, new section 174 to remove the requirement for persons other than the Commission (for example, the Minister) to apply relevant input methodologies when recommending, deciding, or determining certain matters under Part 6.

The SOP amends clause 23, new section 176, which provides for the calculation of the initial value of a regulated fibre service provider’s fibre assets. The assets include a deemed fibre asset equivalent to the financial losses incurred by the provider between 1 December 2011 and the implementation date (which may be 1 January 2020 or a date up to 2 years later). The amendment provides that, in determining those financial losses, the Commission must take into account any accumulated unrecovered returns on investments made under the UFB initiative and must refer to the actual financing costs of any Crown financing provided in connection with those investments.

The SOP amends clause 23, new section 180, which relates to changes to input methodologies. The changes clarify the process that must be followed if the Commission proposes to revoke an input methodology (including giving public notice of its intention and giving interested persons a reasonable opportunity to give their views on the proposed revocation).

The SOP amends clause 23, new section 182, which gives the High Court certain powers on an appeal against an input methodology (for example, to amend it or substitute a new input methodology). This amendment is required as a consequence of a change made to clause 23, new section 166, at select committee. It ensures that the court is exercising its powers on an appeal in accordance with the same criteria applied by the Commission in determining the input methodology.

The SOP amends clause 23, new section 190, which provides that a regulated fibre service provider who is subject only to information disclosure regulation does not have to apply certain input methodologies. The amendment in the SOP removes a reference to an input methodology for quality dimensions (with the effect that the provider must still comply with this input methodology).

The SOP replaces clause 23, new sections 197 to 199 (which relate, respectively, to anchor services, direct fibre access services, and unbundled fibre services) with new sections containing 2 significant differences:

  • first, the replacement sections require regulated fibre service providers to provide the relevant services described in regulations. This replaces the requirement to provide the service in accordance with the prescribed specifications (as the specifications will be covered by the description of the service):

  • secondly, the replacement sections do not require the services to be provided in respect of any premises, building, or access point connected to the provider’s fibre network. The premises, buildings, or access points to which the service must be provided will be included in the description of the service contained in the regulations.

The SOP also makes changes to clause 23, new section 206 and the replacement sections 223 to 225 to align those sections with new sections 197 to 199 as replaced by this SOP.

The SOP inserts new section 200A into clause 23 to provide an exception to new section 200 for services provided on a trial basis. New section 200 requires consistent pricing for providing fibre fixed line access services, regardless of the geographic location of the access seeker or end-user. The exception will apply to a service offered for no more than a year and to no more than 1,000 users over the whole period that it is offered.

The SOP replaces clause 23, new section 204 with a new section. The new section removes any obligation for a regulated service provider to achieve price equivalence in relation to an unbundled layer 1 service to the extent that the service is an input to a relevant service. A relevant service is a service that is subject to a prescribed maximum price that is not a cost-based price.

The SOP amends clause 23, new section 207, which requires the Commission to regularly review how effectively the regulatory provisions in new sections 194, 198, and 199 are meeting the purpose in new section 162. The amendments in the SOP align new section 207(2) with the matters that may be prescribed in regulations under new sections 224 and 225. It is necessary that the Commission be able to consider all of these matters because, in most cases, regulations under new sections 224 and 225 can be made only on the recommendation of the Commission.

The SOP amends clause 23, new section 208 to ensure the Commission has flexibility in describing the fibre fixed line access service being reviewed under that section.

The SOP inserts new section 216A into clause 23 to apply sections 79A and 79B of the Commerce Act 1986 to proceedings for pecuniary penalties under new Part 6. This means that—

  • the standard of proof for the proceedings is the civil standard:

  • the Commission may, by order of the court, obtain discovery and administer interrogatories in relation to the proceedings:

  • a person cannot be subject to both a pecuniary penalty and a criminal conviction for a single contravention of Part 6.

The SOP inserts new section 216B into clause 23 to enable the High Court, in proceedings under new Part 6, to consider evidence that would not otherwise be admissible under general laws of evidence. However, the general laws of evidence will apply to criminal proceedings or proceedings for pecuniary penalties under Part 6.

The SOP replaces clause 23, new sections 222 to 225 to simplify the sections and clarify their intent. The SOP also adds new section 225(6) to prevent the Minister from recommending that a service provided over a fibre network developed as part of UFB 2 (an extension to the Ultra-fast Broadband Initiative) be declared, before 1 January 2026, to be an unbundled fibre service. Under new section 199, any service declared to be an unbundled fibre service must be provided by regulated fibre service providers who are subject to price-quality regulation.

The SOP inserts new section 225A into clause 23. If regulations are made under new section 224 or 225, new section 225A allows further regulations to be made to discharge a local fibre company from its obligation to supply a service under undertakings entered into under section 156AD of the Act.

The SOP amends clause 23, new section 226 to clarify that the first notice specifying points of interconnection may prescribe points of interconnection in addition to those that apply as at 31 December 2019 under the UFB initiative.

The SOP replaces clause 24 with a clause to replace section 9A of the Act (rather than amend it). The replacement clause 24 is substantially the same as clause 24 as reported back from select committee, except that the functions of the Commission under the replacement section also include monitoring compliance with the Commission 111 contact code.

The SOP amends clause 24B, new section 69SA to allow exemptions from the line of business restrictions in sections 69R and 69S of the Act to be granted from the implementation date (which may be 1 January 2020 or a date up to 2 years later). This means exemptions can be granted 3 years earlier than was possible under the Bill as reported back from select committee.

The SOP amends clauses 25 and 26 to allow the Commission to require the payment of a pecuniary penalty, or to accept an undertaking, if a person fails, without reasonable excuse, to comply with the Commission 111 contact code.

The SOP amends clause 29 to allow the High Court to impose certain orders on a person who fails, without reasonable excuse, to comply with the Commission 111 contact code.

The SOP replaces the new definition of industry dispute resolution scheme in clause 33, new section 228 with a definition that includes industry dispute resolution schemes other than the Telecommunications Dispute Resolution scheme. The amended definition also expressly excludes the dispute resolution scheme relating to property access that is referred to elsewhere in the Act.

The SOP inserts new section 232A into clause 33 to require the Commission to make a Commission 111 contact code (the code). The purpose of the code is to ensure that, in the event of a power failure, vulnerable consumers have reasonable access to a means to contact the 111 emergency services. New section 232A(5) defines a vulnerable consumer as a consumer of a telecommunications service to which the code applies who—

  • is at particular risk of requiring the 111 emergency service (for example, due to a known medical condition); and

  • does not have a means for contacting the 111 emergency service that can be operated for a specified minimum period in the event of a power failure.

The code will require providers of telecommunications services specified in the code to supply vulnerable consumers with an appropriate means for contacting the 111 emergency services that can be operated for a specified minimum period in the event of a power failure.

The SOP amends clause 33, new section 233 to require the Commission to consult certain persons (such as the New Zealand Police) before making a Commission 111 contact code.

The SOP amends clause 33, new section 240, which requires the Commission to review each industry dispute resolution scheme once every 3 years. The amendment allows the Commission to consider, and require information from, the scheme provider as part of its review.

The SOP amends clause 36, and inserts new clause 36A and new Schedule 6, to make amendments required as a consequence of a change made at select committee to include broadcasting within the definition of telecommunications.

The SOP amends Schedule 1, new Part 2 of Schedule 1AA as follows:

  • it amends clause 7(3A) to provide that CPI adjustments to prices carried over from a specified contract must be made on 1 July in each year, starting from 2020. This is instead of making the adjustments on 1 January in each year:

  • it inserts new clause 8A to provide an exception from the requirement for geographically consistent pricing contained in new section 200 for prices agreed under contracts entered into before that section comes into force. Under new clause 8A(3), this exception applies for 3 years:

  • it amends new clause 9 to prevent the Commission from recommending, before the first regulatory period, a description of an anchor service that is, or conditions of an anchor service that are, materially different from those set out in a contract entered into under the Ultra-fast Broadband Initiative:

  • it amends new clause 11 to prevent the Minister from recommending that the first regulations made under new section 223 prescribe a description of an anchor service that is, or conditions of the service that are, materially different from those set out in a contract entered into under the Ultra-fast Broadband Initiative:

  • it amends new clause 12 to prevent the Minister from recommending that the first regulations made under new section 224 prescribe a description of a direct fibre access service that is, or conditions of the service that are, materially different from those set out in a contract entered into under the Ultra-fast Broadband Initiative.

The other amendments in this SOP are minor corrections or technical or drafting changes.

Departmental disclosure statement

The Ministry of Business, Innovation, and Employment considers that a departmental disclosure statement is not required to be prepared for this Supplementary Order Paper.

The Honourable Kris Faafoi, in Committee, to propose the amendments shown in the following document.