“CPI means the Consumers Price Index (All Groups) published by Statistics New Zealand

“existing residential line—

• “(a) means a Telecom residential line (other than a party line or a second line) that was an active connection on 20 December 2001; and

• “(b) to avoid doubt, includes any such line that has been replaced or altered since 20 December 2001

“financial year means a period of 12 months beginning on 1 July in any year and ending on 30 June in the following year

“liability allocation determination means a determination of the Commission prepared in accordance with section 87(1)(a)

“liable person means a person who provides a telecommunications service in New Zealand by means of some component of a PTN that is operated by the person

“Ministry means the Ministry responsible for administering this Act

“net cost,—

• “(a) in relation to an instrument that is declared to be a TSO instrument under section 70, means the unavoidable net incremental cost to an efficient service provider of providing the service required by the TSO instrument to commercially non-viable end-users; and

• “(b) in relation to a deemed TSO instrument, means the unavoidable net incremental cost to an efficient service provider of providing the service required by the TSO instrument to all end-users connected to existing residential lines

“new KSO has the meaning set out in section 71

“PTN or public telecommunications network—

• “(a) means a network used, or intended to be used, in whole or in part, by the public for the purpose of telecommunication:

• “(b) includes—

  • “(i) a PSTN:

  • “(ii) a PDN

“qualified revenue means the gross revenue (as determined in accordance with any specifications set by the Commission) that a liable person receives during a financial year for supplying either or both of the following (excluding any amount paid to the liable person by the Crown as compensation for the cost of complying with a TSO instrument that contains a specified amount):

• “(a) telecommunications services by means of its PTN:

• “(b) telecommunications services by means that rely primarily on the existence of its PTN or any other PTN

“TSO charges means the amounts payable to a TSO provider by the Crown under section 94J(1)

“TSO cost calculation determination means a determination of the Commission prepared in accordance with section 94H(1)(a)

“TSO instrument or telecommunications service obligation instrument means—

• “(a) an instrument that is declared to be a TSO instrument under section 70:

• “(b) a deemed TSO instrument”.

• “(a) the Telecommunications Commissioner and no fewer than 2 other members of the Commission must—

  • “(i) make every determination in respect of a designated multinetwork service under section 39; and

  • “(ii) make every pricing review determination under section 51; and

  • “(iii) make every liability allocation determination under section 87; and

  • “(iv) make every TSO cost calculation determination under section 94H; and

• “(ab) the determinations referred to in paragraph (a) must, if the Telecommunications Commissioner and the other members of the Commission are not unanimous in their view, be made in accordance with the majority view; and

• “(b) the Telecommunications Commissioner must report to the Minister about every proposed alteration to Schedule 1 in any of the ways set out in sections 66 and 67 following consideration by the Telecommunications Commissioner and no fewer than 2 other members of the Commission in accordance with clause 4 of Schedule 3, and—

  • “(i) the recommendation included in the final report to the Minister must be supported by the majority of the Telecommunications Commissioner and the other members of the Commission; and

  • “(ii) the final report must include the majority view and any dissenting views; and”.

• “(2A) To avoid doubt, in determining whether or not, or the extent to which, competition in telecommunications markets for the long-term benefit of end-users of telecommunications services within New Zealand is promoted, consideration must be given to the incentives to innovate that exist for, and the risks faced by, investors in new telecommunications services that involve significant capital investment and that offer capabilities not available from established services.”

• “(2) Subsection (1) applies to any other instrument that—

  • “(a) includes or records provisions that state that the parties intend the instrument to be a deemed TSO instrument under this Act; and

  • “(b) is conditional on, or entered into as a consequence of, the structural separation of Telecom.”

“71A TSO instrument may specify total amount payable by the Crown

• “(1) A TSO instrument may specify the total amount payable by the Crown under the instrument for each financial year (the specified amount).

  “(2) The total amount may be specified as—

  • “(a) a fixed monetary amount; or

  • “(b) a capped monetary amount; or

  • “(c) an indexed monetary amount; or

  • “(d) a formula for the calculation of a monetary amount; or

  • “(e) any combination of paragraphs (a) to (d).”

“74 Compliance with TSO instrument

• “(1) A TSO provider must comply with the terms of a TSO instrument.

  “(2) The statutory duty in subsection (1) does not limit or affect any right, duty, liability, or remedy in respect of a TSO instrument that exists or is available apart from this Act.”

“76 When instrument ceases to be TSO instrument

• “(1) An instrument ceases to be a TSO instrument,—

  • “(a) in the case of an instrument that is declared to be a TSO instrument under section 70, if the Governor-General, by Order in Council made on the recommendation of the Minister, revokes the declaration of that TSO instrument; or

  • “(b) in the case of a deemed TSO instrument, on a date appointed by the Governor-General by Order in Council made on the recommendation of the Minister; or

  • “(c) if the instrument is terminated in accordance with its terms.

  “(2) The Minister must not make a recommendation under subsection (1)(a) or (b) unless,—

  • “(a) in the case of an instrument that is declared to be a TSO instrument under section 70, the service provider to whom that instrument applies agrees to the revocation of the declaration; or

  • “(b) in the case of a deemed TSO instrument, the service provider to whom that instrument applies agrees to that instrument ceasing to have effect as a deemed TSO instrument.”

“77 Notification of TSO instrument

• “(1) The Minister must notify the Commission of—

  • “(a) every instrument that is declared to be a TSO instrument under section 70; and

  • “(b) every deemed TSO instrument.

  “(2) The Commission must give public notice of every TSO instrument.”

“Subpart 2—Amounts payable by liable persons to the Crown

“Annual procedure for determining amounts payable by liable persons to the Crown

“80 Interpretation

• In this subpart, unless the context otherwise requires,—

  “financial statements,—

  • “(a) except if section 79 applies, has the same meaning as in section 8 of the Financial Reporting Act 1993; and

  • “(b) if section 79 applies, means a consolidated statement of financial performance of the 2 or more bodies corporate required by that section to be treated as 1 person, prepared in accordance with generally accepted accounting practice, as defined in section 3 of the Financial Reporting Act 1993

  “minimum qualified revenue means $10 million, or such other amount as may be prescribed by regulations made under section 101(1)(a).

  “minimum telecommunications revenue means $10 million, or such other amount, as may be prescribed by regulations made under section 101(1)(a), of gross revenue (as may be determined in accordance with any specifications set by the Commission) that a liable person receives during a financial year for supplying either or both of the following (excluding any amount paid to a liable person by the Crown as compensation for the cost of complying with a TSO instrument that contains a specified amount):

  • “(a) telecommunications services by means of its PTN:

  • “(b) telecommunications services by means that rely primarily on the existence of its PTN or any other PTN.

“81 Subpart does not apply to certain liable persons

• “(1) This subpart does not apply to a liable person in respect of a financial year (financial year A) if—

  • “(a) the liable person was not trading in the financial year preceding financial year A; or

  • “(b) the liable person's qualified revenue for the year preceding financial year A was less than the minimum qualified revenue.

  • “(b) the liable person's telecommunications revenue for the year preceding financial year A was less than the minimum telecommunications revenue.

  “(2) For the purpose of determining whether a person is a liable person to whom this subpart applies in respect of a financial year, the Commission may, by written notice to that person, require the person to provide to the Commission, within the time specified in the notice,—

  • “(a) a copy of the person's financial statements for the year preceding financial year A; and

  • “(ab) any further information specified by the Commission for the purpose of enabling it to verify the qualified revenue telecommunications revenue of that person for the year preceding financial year A; and

  • “(b) a certificate that complies with subsection (3).

  “(3) A certificate complies with this subsection if—

  • “(a) it certifies the person's qualified revenue telecommunications revenue for the year preceding financial year A; and

  • “(b) it is signed by 2 directors of the person with the authority of the other directors.

“82 Liable persons must produce information on qualified revenue

• Not later than 60 working days before the end of each financial year (financial year A), each liable person must provide to the Commission a copy of—

  • “(a) its financial statements for the financial year preceding financial year A; and

  • “(b) any further information specified by the Commission for the purpose of enabling it to verify the qualified revenue of that person for the financial year preceding financial year A.

“83 Liable persons must produce information for purposes of liability allocation determination

• “(1) Not later than 60 working days after the end of each financial year, each liable person must provide to the Commission—

  • “(a) all prescribed information or, if there is no prescribed information, information specified by the Commission, for the purpose of enabling the Commission to make its determination in accordance with section 88(a); and

  • “(b) a report that complies with subsection (2).

  “(2) A report complies with this subsection if—

  • “(a) it is prepared by a qualified auditor; and

  • “(b) it includes a statement of the extent to which the information provided by the liable person under subsection (1)(a) is correct and complete.

“84 Commission to prepare draft liability allocation determination

• “(1) The Commission must—

  • “(a) prepare a draft liability allocation determination for each financial year; and

  • “(b) give public notice of that draft determination; and

  • “(c) include in the public notice the closing date for submissions, which must be not later than 20 working days after the date of giving public notice.

  “(2) The Commission must make reasonable efforts to do the things referred to in subsection (1) not later than 80 working days after the end of the financial year.

“85 Matters to be included in draft liability allocation determination

• “(1) A draft liability allocation determination must include—

  • “(a) the amount of each liable person's qualified revenue; and

  • “(b) the amount of the telecommunications development levy payable by each liable person for the financial year, calculated in accordance with the following formula:

    	a		×	c
    	b

    where—

    a

    is the amount of the liable person's qualified revenue

    b

    is the sum of all liable persons' qualified revenue

    c

    is the telecommunications development levy specified for the relevant year in Schedule 3B; and

  • “(c) the methodology applied by the Commission in preparing the determination; and

  • “(d) the reasons for the determination.

  “(2) To avoid doubt, the Commission may determine what revenue basis to use for the purposes of subsection (1)(a) (for example, a net revenue basis).

“86 Conferences on draft liability allocation determination

• The Commission may—

  • “(a) hold conferences in relation to the draft liability allocation determination; and

  • “(b) invite to those conferences any person who has a material interest in the determination.

“87 Commission to prepare final liability allocation determination

• “(1) The Commission must—

  • “(a) prepare a final liability allocation determination; and

  • “(b) give public notice of that final determination; and

  • “(c) give a copy of that final determination to all liable persons.

  “(2) The Commission must make reasonable efforts to do the things referred to in subsection (1) not later than 20 working days after the closing date for submissions specified in accordance with section 84(1)(c).

“88 Matters to be included in final liability allocation determination

• A final liability allocation determination must include—

  • “(a) the amount of each liable person's qualified revenue; and

  • “(b) the amount of the telecommunications development levy payable by each liable person, calculated in accordance with the formula set out in section 85(1)(b); and

  • “(c) the methodology applied by the Commission in preparing the determination; and

  • “(d) the reasons for the determination.

“89 Payment by liable persons to the Crown

• “(1) Each liable person must pay to the Crown the amount set out in the determination in accordance with section 88(b) not later than 20 working days after the date that the determination is publicly notified.

  “(2) If that amount is not paid on or before the due date,—

  • “(a) it is recoverable in any court of competent jurisdiction as a debt due to the Crown; and

  • “(b) the liable person must pay the Crown interest on the unpaid amount at the 90-day bank bill rate (as at 21 working days after the date on which the determination is publicly notified) plus 5% for the period from the time the amount was due until the time at which it is paid.

  “(3) Subsection (2) does not authorise the imposing of interest on interest.

“General matters

“90 Crown use of telecommunications development levy

• “(1) The amounts paid by liable persons under section 89 (collectively, the telecommunications development levy) may be used for the following purposes:

  • “(a) to pay TSO charges:

  • “(b) to pay for non-urban telecommunications infrastructure development:

  • “(c) to pay for upgrades to the emergency service calling system:

  • “(d) any other purpose that the Minister considers will facilitate the supply of certain telecommunications services to groups of end-users within New Zealand to whom those telecommunications services may not otherwise be supplied on a commercial basis or at a price that is considered by the Minister to be affordable to those groups of end-users.

  “(1A) The telecommunications development levy must not be used for a purpose under subsection (1)(d) unless the Minister has first consulted liable persons and any persons and organisations that the Minister considers appropriate having regard to the proposed use of the levy.

  “(2) To avoid doubt, except as provided in section 94J, nothing in this section requires the Crown to use any amount paid by liable persons under section 89 within any particular time.

“91 Commission must notify final liability allocation determination before notifying TSO cost calculation determination

• “(1) The Commission may determine the priority between the preparation of a liability allocation determination and the preparation of a TSO cost calculation determination and, accordingly, may comply with sections 84 to 88 and sections 94D to 94I in the sequence, as between those 2 sets of sections, as it thinks fit.

  “(2) However, the Commission must publicly notify a final liability allocation determination for each financial year in accordance with section 87(1)(b) before it publicly notifies any final TSO cost calculation determination for that financial year in accordance with section 94H(1)(b).

“91A Annual telecommunications development levy may be reduced by Order in Council

• “(1) The Governor-General may, by Order in Council made on the recommendation of the Minister, amend Schedule 3B by reducing the annual telecommunications development levy set out in that schedule for 1 or more future years.

  “(2) The Minister must not recommend the making of an order unless the Minister is satisfied that the full amount set out in Schedule 3B is not required for the purposes in section 90.

“Subpart 2A—TSO charges payable by the Crown

“Assessment of compliance

“92 Assessment of compliance with TSO instrument

• Not later than 60 working days after the end of each financial year, the Commission must—

  • “(a) assess a TSO provider's compliance with its TSO instrument during that financial year in accordance with any process set out in the TSO instrument; and

  • “(b) notify the TSO provider and the Minister, in writing, of any non-compliance by the TSO provider with the TSO instrument.

“TSO provider may request TSO cost calculation determination

“93 TSO provider under TSO instrument without specified amount may request TSO cost calculation determination

• “(1) If a TSO provider under a TSO instrument that does not contain a specified amount wishes to have the TSO charges for the instrument determined in respect of a financial year, the TSO provider must notify the Commission that it wishes to invoke the procedure in sections 94B to 94I for the preparation of a TSO cost calculation determination for that financial year.

  “(2) The notification must be—

  • “(a) in writing; and

  • “(b) given not later than 90 working days after the end of the relevant financial year.

“94 TSO provider who requests TSO cost calculation determination liable for costs in certain circumstances

• “(1) A TSO provider who notifies the Commission under section 93 must, if the Commission determines the TSO charges for the instrument to be zero, pay the costs of the Commission relating to the procedure in sections 94D to 94I for the preparation of the TSO cost calculation determination (including the costs of any expert advice) as directed by the Commission in writing.

  “(2) The Commission may enforce a direction given under subsection (1) by filing it in the prescribed form in the Wellington Registry of the High Court.

  “(3) A direction that is filed in the Registry of the High Court under this section is enforceable as a judgment of the High Court in its civil jurisdiction.

“94AA Withdrawal of request for TSO cost calculation determination

• “(1) A TSO provider who notifies the Commission under section 93 may subsequently withdraw its request for a TSO cost calculation determination.

  “(2) The withdrawal must be made by submitting a notice in writing to the Commission before the Commission publicly notifies its final TSO cost calculation determination under section 94H(1)(b).

  “(3) A TSO provider who withdraws a request for a TSO cost calculation determination must pay the costs of the Commission (including the costs of any expert advice) relating to as much of the procedure in sections 94 to 94I sections 94D to 94I as has been undertaken in preparing the determination before the withdrawal, as directed by the Commission in writing.

  “(4) Section 94(2) and (3) apply to the enforcement of the direction.

“94A TSO charges deemed to be zero if TSO provider does not request TSO cost calculation determination

• If a TSO provider under a TSO instrument that does not contain a specified amount does not notify the Commission in accordance with section 93,—

  • “(a) sections 91 and 94B to 94J do not apply in respect of the TSO provider or TSO instrument; and

  • “(b) the TSO charges for the instrument are deemed to be zero.

“Annual procedure for determining TSO charges payable by the Crown

“94B Calculations of net cost and auditor's report must be given to Commission

• “(1) Not later than 90 working days after the end of each financial year, a TSO provider under a TSO instrument that does not contain a specified amount must provide to the Commission—

  • “(a) calculations of the net cost to the TSO provider of complying with the TSO instrument during the financial year; and

  • “(b) a report prepared by a qualified auditor that includes a statement of whether or not the calculations comply with—

    • “(i) any prescribed requirements relating to those calculations; and

    • “(ii) any requirements of the Commission.

  “(2) This section is subject to section 94A.

“94C Considerations for determining net cost

• “(1) In calculating the net cost under section 94B and calculating the net cost for the purposes of a draft TSO cost calculation determination under section 94D and a final TSO cost calculation determination under section 94H, the following must be taken into account:

  • “(a) in the case of an instrument that is declared to be a TSO instrument under section 70, the range of direct and indirect revenues and associated benefits derived from providing telecommunications services to commercially non-viable end-users, less the costs of providing those services to those end-users:

  • “(b) in the case of a deemed TSO instrument, the range of direct and indirect revenues and associated benefits derived from providing telecommunications services to all end-users connected to existing residential lines, less the costs of providing those services to those end-users:

  • “(c) the provision of a reasonable return on the incremental capital employed in providing those services to end-users.

  “(2) Subsection (1) is subject to subsections (3) and (4).

  “(3) In calculating the net cost for the purposes of a draft TSO cost calculation determination under section 94D and a final TSO cost calculation determination under section 94H, the Commission—

  • “(a) may choose not to include profits from any new telecommunications services that involve significant capital investment and that offer capabilities not available from established telecommunications services; and

  • “(b) must not include any losses from telecommunications services other than services that the TSO instrument requires the TSO provider to provide; and

  • “(c) must consider the purpose set out in section 18.

  “(4) In calculating the net cost under section 94B, the TSO provider must comply with any requirements of the Commission relating to the application of subsection (3)(a) to (c).

  “(5) In this section,—

  “established telecommunications services means telecommunications services that are not new telecommunications services

  “new telecommunications services means telecommunications services that were first provided in New Zealand within 5 years before the start of the financial year to which the calculation of the net cost relates.

“94D Commission to prepare draft TSO cost calculation determination

• “(1) The Commission must—

  • “(a) prepare a draft TSO cost calculation determination in respect of each TSO instrument for each financial year; and

  • “(b) give public notice of that draft determination; and

  • “(c) include in the public notice the closing date for submissions, which must be not later than 20 working days after the date of giving public notice.

  “(2) The Commission must make reasonable efforts to do the things referred to in subsection (1) not later than 120 working days after the end of the financial year.

  “(3) This section is subject to sections 93 and 94A.

“94E Matters to be included in draft TSO cost calculation determination

• A draft TSO cost calculation determination must include,—

  • “(a) if the TSO instrument does not contain a specified amount, the net cost to the TSO provider of complying with the TSO instrument during the financial year and all material information that—

    • “(i) relates to the calculation of the net cost; and

    • “(ii) would not, in the opinion of the Commission, be likely to unreasonably prejudice the commercial position of the TSO provider; and

  • “(b) if the TSO instrument contains a specified amount, the dollar amount of the specified amount and all material information that—

    • “(i) relates to the calculation of that amount; and

    • “(ii) would not, in the opinion of the Commission, be likely to unreasonably prejudice the commercial position of the TSO provider; and

  • “(c) the amount (if any) by which the total amount that the TSO provider would receive from the Crown in relation to the TSO instrument must be reduced because the TSO provider has not complied with the TSO instrument; and

  • “(d) the methodology applied by the Commission in preparing the determination; and

  • “(e) the reasons for the determination.

“94F Requirements for draft TSO cost calculation determination

• In preparing a draft TSO cost calculation determination of the matters referred to in section 94E(c), the Commission must consider the steps taken (if any) by the TSO provider to remedy any non-compliance by the TSO provider with the TSO instrument between the date the TSO provider was notified of the non-compliance under section 92(b) and the date that is 15 working days before public notice is given under section 94D(1)(b).

“94G Conferences on draft TSO cost calculation determination

• The Commission may—

  • “(a) hold conferences in relation to a draft TSO cost calculation determination; and

  • “(b) invite to those conferences any person who has a material interest in the determination.

“94H Commission to prepare final TSO cost calculation determination

• “(1) The Commission must—

  • “(a) prepare a final TSO cost calculation determination; and

  • “(b) give public notice of that final determination; and

  • “(c) give a copy of that final determination to the Minister, all liable persons, and the TSO providers in relation to the TSO instrument.

  “(2) The Commission must make reasonable efforts to do the things referred to in subsection (1) not later than 40 working days after the closing date for submissions specified in accordance with section 94D(1)(c).

  “(3) This section is subject to sections 93 and 94A.

“94I Matters to be included in final TSO cost calculation determination

• “(1) A final TSO cost calculation determination must include,—

  • “(a) if the TSO instrument does not contain a specified amount, the net cost to the TSO provider of complying with the TSO instrument during the financial year and all material information that—

    • “(i) relates to the calculation of the net cost; and

    • “(ii) would not, in the opinion of the Commission, be likely to unreasonably prejudice the commercial position of the TSO provider; and

  • “(b) if the TSO instrument contains a specified amount, the dollar amount of the specified amount and all material information that—

    • “(i) relates to the calculation of that amount; and

    • “(ii) would not, in the opinion of the Commission, be likely to unreasonably prejudice the commercial position of the TSO provider; and

  • “(c) the amount (if any) by which the total amount that the TSO provider would receive from the Crown in relation to the TSO instrument must be reduced because the TSO provider has not complied with the TSO instrument; and

  • “(d) the amount payable by the Crown to the TSO provider in relation to the TSO instrument in respect of the financial year calculated,—

    • “(i) in the case of a TSO instrument that does not contain a specified amount, by subtracting the amount of the reduction (if any) referred to in paragraph (c) from the net cost referred to in paragraph (a); and

    • “(ii) in the case of a TSO instrument that contains a specified amount, by subtracting the amount of the reduction (if any) referred to in paragraph (c) from the specified amount referred to in paragraph (b); and

  • “(e) the amount payable by the Crown to the TSO provider in relation to the TSO instrument for the loss of use of the amount referred to in paragraph (d), calculated at the 90-day bank bill rate (as at the date of the final determination) for the period commencing from the end of the financial year and ending with the date of the final TSO cost calculation determination; and

  • “(f) the methodology used by the Commission in preparing the determination; and

  • “(g) the reasons for the determination.

  “(2) To avoid doubt, if the calculation under subsection (1)(a) or (b) results in a figure that is zero or less, the amount for the purposes of subsection (1)(d) and (e), and that must be included in the determination, is zero.

“94J Payment by the Crown to TSO provider

• “(1) The Crown must pay to the TSO provider, not later than 30 working days after the date that the final TSO cost calculation determination is publicly notified,—

  • “(a) the amount set out in the final TSO cost calculation determination in accordance with section 94I(1)(d); and

  • “(b) the amount set out in the final TSO cost calculation determination in accordance with section 94I(1)(e).

  “(2) If the Crown does not pay the total of the amounts referred to in subsection (1) on or before the due date, the Crown must pay the TSO provider interest on the unpaid amount at the 90-day bank bill rate (as at 31 working days after the date on which the final cost calculation determination is publicly notified) plus 5% for the period from the time the amount was due until the time at which it is paid.”

“100 Right of appeal to High Court

• “(1) The following persons and (as applicable) the Crown may appeal to the High Court against the following matters:

  • “(a) a liable person, against a determination of the Commission, in relation to that person, of the matter referred to in section 88(a):

  • “(b) a TSO provider, against a direction of the Commission under section 94(1) or 94AA(3):

  • “(c) a liable person, TSO provider, or the Crown, against a determination of the Commission in respect of a matter referred to in section 94I(1)(a) to (g).

  “(2) An appeal under subsection (1) may be on a question of law only.

  “(3) If an appeal or judicial review proceedings are commenced about a liability allocation determination, TSO cost calculation determination, or direction under section 94(1), the determination or direction continues to have effect and is enforceable as if the proceedings had not been commenced until the proceedings are finally disposed of.

  “(4) To avoid doubt, the obligations to pay money imposed by sections 89 and 94J continue to have effect and are enforceable despite any appeal or judicial review proceedings about a determination that relates to those payments, until the proceedings are finally disposed of.

  “(5) TSO provider, in subsection (1), means the TSO provider under the TSO instrument to which the direction or determination relates.”

“100BA Commission must include information about spending of TSO charges paid in relation to deemed TSO instrument

• “(1) The Commission must include the information specified in subsection (2) in—

  • “(a) a draft TSO cost calculation determination under section 94D, in relation to a deemed TSO instrument; and

  • “(b) a final TSO cost calculation determination under section 94H, in relation to a deemed TSO instrument.

  “(2) The information referred to in subsection (1) is the amount of the total TSO charges most recently received by the TSO provider (if any), that the TSO provider has spent on each of the following, and details of that expenditure:

  • “(a) TSO-related infrastructure:

  • “(b) TSO-related operational costs:

  • “(c) any other items.

  “(3) For the purpose of enabling the Commission to comply with subsection (1), the Commission may require the TSO provider to prepare and provide information about the spending of the TSO charges most recently received by the TSO provider.

  “(4) The TSO provider must prepare and provide any information required under subsection (3) in accordance with the Commission's requirements.”

• “(3) In complying with section 100BA, the Commission must ensure that satisfactory provision exists to protect the confidentiality of any information that may reasonably be regarded as confidential or commercially sensitive.”

“101 Regulations

• “(1) The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations that—

  • “(a) determine the amount of the minimum qualified revenue minimum telecommunications revenue for the purposes of section 80:

  • “(b) prescribe the information that must be provided to the Commission under section 83(1)(a):

  • “(c) provide for the appointment of auditors who may make an auditor's report under section 83(1)(b) or 94B(1)(b):

  • “(d) prescribe requirements to which section 94B(1)(b)(i) applies:

  • “(e) provide for any methods for all or any of the following:

    • “(i) preparing a draft determination of the amount of qualified revenue referred to in section 85(1)(a):

    • “(ii) determining the amount of qualified revenue referred to in section 88(a):

    • “(iii) calculating the net cost under section 94B:

    • “(iv) preparing a draft determination of the net cost referred to in section 94E(a):

    • “(v) determining the net cost referred to in section 94I(1)(a).

  “(2) The Minister must not make a recommendation under subsection (1)(b) to (e) unless—

  • “(a) the Commission has consulted every liable person; and

  • “(b) the Commission has recommended that the regulations be made.

  “(3) The Minister must not recommend the making of regulations under subsection (1)(a) unless the Minister is satisfied that, if the regulations were made, the minimum qualified revenue under those regulations would not exceed the maximum qualified revenue threshold.

  “(3) The Minister must not recommend the making of regulations under subsection (1)(a) unless the Minister is satisfied that, if the regulations were made, the minimum telecommunications revenue under those regulations would not exceed the maximum telecommunications revenue threshold.

  “(4) In this section, maximum qualified revenue threshold maximum telecommunications revenue threshold means the amount calculated in accordance with the following formula:

  	a		×	c
  	b

  where—

  a

  is the CPI index number for the last quarter before the Minister's recommendation would be made

  b

  is the CPI index number for the last quarter before the date of commencement of the Telecommunications (TSO, Broadband, and Other Matters) Amendment Act 2010

  c

  is $10 million.

“101A Review of local service TSO arrangements

• “(1)  The chief executive of the Ministry must,—

  • “(a) at the start of 2013, commence a review of the deemed TSO instruments and the provisions of this Act that implement those deeds (including the provisions that relate to funding) (collectively, the deemed TSO arrangements), including consideration of the following:

    • “(i) the operation of the deemed TSO arrangements:

    • “(ii) changes in the telecommunications sector that have arisen from investments in, and the roll-out of, new and enhanced telecommunications infrastructure and facilities and the impact of those changes on the deemed TSO arrangements:

    • “(iii) the continued need for, and relevance of, the deemed TSO arrangements:

    • “(iv) the practicality of adopting universal, rather than provider-specific, arrangements for provision of the services and achievement of the outcomes covered by the deemed TSO arrangements:

    • “(v) the impact of the funding arrangements for deemed TSO instruments and the calculation of costs in relation to deemed TSO instruments on TSO providers, market competition, and the development generally of the telecommunications industry:

    • “(vi) alternative arrangements for achieving the purpose set out in section 70(1), including—

      • “(A) the potential for adopting a contestable TSO model for deemed TSO arrangements and the costs and benefits of those alternatives in comparison with the deemed TSO arrangements; and

      • “(B) alternative approaches for the funding of deemed TSO instruments and the calculation of costs in relation to deemed TSO instruments, including the costs and benefits of those alternative approaches in comparison with the deemed TSO funding arrangements:

    • “(vii) related regulatory issues; and

  • “(b) report to the Minister on its findings not later than the end of 2013.

  “(1A) In carrying out the review, the chief executive of the Ministry must consult with interested parties, including the Commission, industry participants, consumers, and Māori.

  “(2) In conducting the review and reporting to the Minister, the chief executive of the Ministry must take the following into account:

  • “(a) the long-term interests of end-users of telecommunications services:

  • “(b) the long-term interests of those end-users in respect of whom the provision of services covered by the deemed TSO arrangements is commercially non-viable:

  • “(c) the legitimate business interests of TSO providers:

  • “(d) the ability for providers of TSO services to receive a reasonable return on the incremental capital employed in providing the services required under deemed TSO instruments:

  • “(e) the impact on the incentives and capabilities of TSO providers and other telecommunications service providers to invest in new and improved telecommunications facilities and services:

  • “(f) the effects on competition in telecommunications services markets in New Zealand.”

“Subpart 3—Access to multi-unit complexes to which fibre-to-the-premises is to be deployed

“155A Overview

• “(1) This subpart provides a statutory right of access to multi-unit complexes that fibre-to-the-premises service providers may use if an access agreement is not negotiated.

  “(2) This subpart does not limit the statutory rights of access in sections 120 to 127.

“155B Interpretation

• In this subpart, unless the context otherwise requires,—

  “access order means an order of the District Court referred to in section 155H

  “Code means the Code that has been approved under section 155J, and includes any amendment to the Code that is approved under that section

  “consumer, in relation to a consumer complaints system, includes an owner or occupier

  “consumer complaints system, in relation to an FTTP service provider, means either of the following:

  • “(a) an industry-based complaints system that has been established by the telecommunications industry and that has been approved by the Minister for the purposes of resolution of complaints under this subpart and the Code; or

  • “(b) a consumer complaints system facilitated by Part 4B

  “fibre-to-the-premises access network has the same meaning as in section 156AB

  “FTTP service provider means the owner or operator of a fibre-to-the-premises access network

  “maintenance has the same meaning as in section 117

  “multi-unit complex means—

  • “(a) a building that contains 2 or more distinct units (including the land associated with that group of buildings); or

  • “(b) a group of buildings that are used communally (including the land associated with that group of buildings); or

  • “(c) land that is in 2 or more titles that are subject to an existing easement for telecommunications or electricity purposes; or

  • “(d) land that is the subject of more than 1 property interest (for example, shared rights of way and cross-leases)

  “multi-unit complex means—

  • “(a) a building that contains 2 or more distinct units (including the land on which the building is sited); or

  • “(b) a group of buildings that are used communally (including the land on which those buildings are sited)

  “owner, in relation to any part of a multi-unit complex, means—

  • “(a) a person who has a freehold or a leasehold interest in that part of the complex; and

  • “(b) any body corporate under the Unit Titles Act 1972 or the registered proprietor of the complex to which the unit plan relates; and

  • “(c) any other person who has a legal right to grant access to the building or to approve the performance of work in the building

  “owner, in relation to any part of a multi-unit complex, means any 1 or more of the following:

  • “(a) a person who has a freehold or a leasehold interest in that part of the complex:

  • “(b) any body corporate under the Unit Titles Act 1972 or the registered proprietor of the complex to which the unit plan relates:

  • “(c) any other person who has a legal right to grant access to the building or to approve the performance of work in the building

  “preliminary notice means a notice that complies with section 155E

  “second notice means a notice that complies with section 155G.

“Statutory right of access to multi-unit complexes

“155C Nature of statutory right of access to multi-unit complexes

• “(1) The right of access conferred by this subpart is that an FTTP service provider may, for the purpose of constructing, erecting, laying, maintaining, or upgrading all or any part of a fibre-to-the-premises access network,—

  • “(a) enter a multi-unit complex at reasonable times, with or without any person who is, or any thing that is, reasonably necessary; and

  • “(b) perform work that is reasonably necessary for the purpose of constructing, erecting, laying, maintaining, or upgrading all or any part of a fibre-to-the-premises access network.

  “(2) This right of access applies only—

  • “(a) if the service provider has complied with sections 155D to 155H in respect of each part of the multi-unit complex accessed under this subpart; and

  • “(b) to authorise the matters referred to in subsection (1).

“155D Preconditions before statutory right of access to multi-unit complexes may be exercised

• Before an FTTP service provider enters, or performs work in, any part of a multi-unit complex under this subpart, the service provider must first—

  • “(a) have agreed to be bound by the Code; and

  • “(b) have taken all reasonable steps to negotiate an agreement for entry with the owner in accordance with the Code; and

  • “(c) have served a preliminary notice on each owner of that part of the multi-unit complex in accordance with section 155E; and

  • “(d) have served a second notice in accordance with section 155G on each owner of that part of the multi-unit complex who has not opted out in accordance with section 155F; and

  • “(e) have obtained an access order from the District Court under section 155H in respect of each owner of that part of the multi-unit complex who has opted out in accordance with section 155F; and

  • “(f) be a member of a consumer complaints system that provides for the resolution of complaints about compliance with this subpart and the Code.

“155DA How statutory right of access to multi-unit complex must be exercised

• “(1) The entry to a multi-unit complex under section 155C must only be made by an officer, employee, or agent (including a contractor) of the FTTP service provider authorised by it in writing.

  “(2) The person entering must produce evidence of his or her authority and identity—

  • “(a) on initial entry; and

  • “(b) after the initial entry, on request.

  “(3) Subsections (1) and (2) are subject to the terms and conditions of any access order from the District Court under section 155H.

  “(4) In this section, evidence of authority has the same meaning as in section 118, with any necessary modifications.

“Process

“155E Requirements in respect of preliminary notice

• “(1) A preliminary notice must—

  • “(a) contain the matters specified in subsection (2); and

  • “(b) comply with the Code; and

  • “(c) be served on each person who is known by the service provider to be a current owner; and

  • “(d) be left in a prominent place on the land.

  “(2) The matters that must be included in the first notice are—

  • “(a) an explanation of the infrastructure the service provider is seeking to deploy, maintain, or upgrade, and the benefits of that work:

  • “(b) what the initial investigation would entail, including initial indications of the areas the service provider may want to access during the investigation, if known:

  • “(c) the date and time of the intended investigation:

  • “(d) an explanation that if the service provider does not hear from the owner within 20 working days (or any longer period agreed between the service provider and the owner), the owner will be deemed to have consented in principle to the investigation:

  • “(e) an explanation that the owner can opt out of the access regime, and details as to reasonable grounds for opting out and the process for doing so:

  • “(f) the contact details of the service provider to be used by the owner if the owner wishes to opt out or to negotiate an alternative time or date for the investigation:

  • “(g) an explanation that, if the owner opts out on unreasonable grounds, the service provider may apply to the District Court for an access order:

  • “(h) an assurance that the service provider has agreed to be bound by the Code and will, when entering the building, comply with the requirements in the Code, and an Internet link to the Code:

  • “(i) an explanation that, if the owner or occupier believes that the service provider has breached the Code, the owner or occupier may complain to a consumer complaints system:

  • “(j) an explanation of the process of making a complaint.

“155F Opting out of providing access under subpart

• “(1) An owner may opt out of the access regime in this subpart by—

  • “(a) serving an opt-out notice on the service provider within 20 working days of receiving a preliminary notice or a second notice (or any longer period agreed between the service provider and the owner); or

  • “(b) denying access to a service provider.

  “(2) An opt-out notice must be in writing and sent to the contact address given by the service provider.

  “(3) The service provider has no right of access under this subpart after an opt-out happens unless the service provider obtains an access order granted by the District Court.

“155G Requirements in respect of second notice

• “(1) A second notice must—

  • “(a) contain the matters specified in subsection (2); and

  • “(b) comply with the Code; and

  • “(c) be served on each person who is known by the service provider to be a current owner, and left in a prominent place on the land,—

    • “(i) no earlier than 10 working days after the earlier of—

      • “(A) the expiration of the 20-working-day period referred to in section 155E(2)(d) (or any longer period agreed between the service provider and the owner); or

      • “(B) the date of notification by the owner that the owner consents to the work as proposed in the preliminary notice; and

    • “(ii) no later than 21 working days before the time proposed in the notice for the start of the work.

  “(2) The second notice must give the owner all the key information relating to the proposed work, including—

  • “(a) an explanation of the exact details of the proposed work, including—

    • “(i) the areas in which it will occur; and

    • “(ii) the nature of the work, including whether it will require structural work; and

    • “(iii) the nature of any fixed infrastructure that will be installed in the process:

  • “(b) details of the proposed timing of the work and the length of time it is intended to take:

  • “(c) an explanation of ongoing access requirements for repairs and maintenance:

  • “(d) details of any costs to the owner associated with the work:

  • “(e) an explanation that the owner can opt out, and details as to reasonable grounds for opting out and the process for doing so:

  • “(f) the contact details of the service provider to be used if the owner wishes to opt out or negotiate an alternative time or date for the work:

  • “(g) an explanation that, if the owner opts out on unreasonable grounds, the service provider may apply to the District Court for an access order:

  • “(h) an assurance that the service provider has agreed to be bound by the Code and will, when entering the building, comply with the requirements in the Code, and an Internet link to the Code:

  • “(i) an explanation that, if the owner or occupier believes that the service provider has breached the Code, the owner or occupier may complain to a consumer complaints system:

  • “(j) an explanation of the process of making a complaint.

“155H Access orders from District Court

• “(1) If an owner has opted out, the service provider may apply to the District Court for an access order that authorises the service provider, for the purpose of constructing, erecting, laying, maintaining, or upgrading all or any part of a fibre-to-the-premises access network, to—

  • “(a) enter a multi-unit complex at reasonable times, with or without any person who is, or any thing that is, reasonably necessary; and

  • “(b) perform work that is reasonably necessary for the purpose of constructing, erecting, laying, maintaining, or upgrading all or any part of a fibre-to-the-premises access network.

  “(2) The District Court may grant an access order only if the court is satisfied that the owner has unreasonably opted out.

  “(3) The District Court must, in making that decision, consider whether the service provider has taken reasonable steps to negotiate an agreement for entry with the owner before applying to the court.

  “(4) An access order may be made on any terms and conditions that the District Court thinks fit.

  “(5) Sections 120(2), and 122 to 124 apply with necessary modifications.

“Code

“155I Preparation of Code

• “(1) The Minister must prepare a Code relating to access to multi-unit complexes by FTTP service providers under this subpart or by agreement.

  “(2) The minimum matters that must be included in the Code are—

  • “(a) guidance on reasonable processes and time frames for negotiating access with owners; and

  • “(b) guidance as to cost sharing between service providers and owners, and processes for agreeing final cost splits; and

  • “(c) guidance as to reasonable grounds for opting out; and

  • “(d) guidance as to ongoing costs and reasonable conditions of ongoing access.

  “(3) The Code may contain any other provisions that are necessary or desirable.

  “(4) The Minister must, before recommending that the Governor-General approve a Code, consult service providers, and any other persons, that the Minister reasonably considers may be likely to be representative of the persons to be affected by the Code.

“155J Approval and status of Code

• “(1) The Governor-General may, by Order in Council made on the recommendation of the Minister, approve a Code.

  “(2) The order may refer to, but need not contain, the Code, and must be published in the Gazette.

  “(3) The order and the Code are regulations for the purposes of the Regulations (Disallowance) Act 1989.

  “(4) The order, but not the Code, is a regulation for the purposes of the Acts and Regulations Publication Act 1989.

  “(5) The Code must be presented to the House of Representatives no later than 16 days after the date on which it is approved.

  “(6) If any provision of the Code conflicts with this or any other Act, or with any regulation made under this or any other Act, the Act or regulation prevails.

  “(7) The Minister may at any time prepare an amendment to the Code, and subsections (1) to (6) apply accordingly.

  “(8) The Minister must ensure that the Code, and every amendment to it,—

  • “(a) is published on an Internet site that is publicly available at all reasonable times; and

  • “(b) is available for purchase in hard copy, at no more than a reasonable cost, from the head office of the Ministry.

“Consumer complaints system

“155K Compliance with rules and binding settlements

• “(1) A service provider who is a member of a consumer complaints system must comply with the rules of that system that relate to complaints about access to multi-unit complexes.

  “(2) On the application of the consumer complaints adjudicator or other person responsible for a consumer complaints system, a District Court may require a member of the system to do either or both of the following:

  • “(a) comply with the rules of the system that relate to complaints about access to multi-unit complexes:

  • “(b) comply with a binding settlement determined by the system in response to a complaint about access to multi-unit complexes.

  “(3) If a District Court is satisfied that the terms of a binding settlement are manifestly unreasonable, the court's order under subsection (2)(b) may modify the terms of the binding settlement, but only to the extent that the modification results in a binding settlement that could have been made under the consumer complaints system.

  “(4) If an order requiring a member to comply with a binding settlement includes a requirement that the member pay an amount of money to a person, that order (or part of the order) may be enforced as if it were a judgment by a District Court for the payment of a sum of money.

  “(5) A reference in this section to a member includes a reference to a person who was a member of the consumer complaints system at the relevant time but is no longer a member at the time of the application or order.

“155L Offence to fail to comply with District Court order

• “(1) A member or former member of a consumer complaints system who, knowing that the member or former member is subject to an order made under section 155K, fails to comply with the order, or fails to comply with the order within the time or in the manner required by the order, commits an offence and is liable on summary conviction to a fine not exceeding $100,000.

  “(2) Nothing in this section applies to an order or part of an order of a District Court referred to in section 155K(4).”

• “(i) fails, without reasonable excuse, to provide to the Commission, not later than the time specified by it, the information or documents referred to in section 81(2):

• “(ia) knowingly provides or signs a false or misleading certificate under section 81:

• “(ib) knowingly provides false or misleading information or documents under section 81:

• “(j) fails, without reasonable excuse, to comply with section 82:

• “(ja) knowingly provides false or misleading information or documents under section 82:”.

• “(la) fails, without reasonable excuse, to comply with section 94B:

• “(lb) knowingly provides false or misleading information or documents under section 94B:

• “(lc) fails, without reasonable excuse, to comply with a requirement of the Commission under section 100BA(3):

• “(ld) knowingly provides false or misleading information or documents under section 100BA:”.

“157AA Minister must review regulatory framework

• “(1) The Minister must, not later than 30 September 2016, commence a review of the policy framework for regulating telecommunications services in New Zealand, taking account of the market structure and technology developments and competitive conditions in the telecommunications industry at the time of the review, including the impact of fibre, copper, wireless, and other telecommunications network investment.

  “(2) The review must—

  • “(a) consider whether the existing regulatory framework under the Telecommunications Act 2001 is the most effective means to—

    • “(i) promote competition for the long-term benefit of end-users; and

    • “(ii) promote the legitimate commercial interests of access providers and access seekers; and

    • “(iii) encourage efficient investment for the long-term benefit of end-users, by—

      • “(A) providing investors with an expectation of a reasonable return on their investment; and

      • “(B) providing sufficient regulatory stability, transparency, and certainty to enable businesses to make long-term investments; and

    • “(iv) support innovation in telecommunications markets, or deregulation where sufficient competition exists; and

  • “(b) assess whether alternative regulatory frameworks, including (without limitation) generic price control, would be a preferable and more effective means of achieving these outcomes.

  “(3) In carrying out the review, the Minister must—

  • “(a) consult with interested parties, including the Commission, industry participants, consumers, and Māori; and

  • “(b) take into account—

    • “(i) the extent of network coverage of services provided on fibre, copper, wireless, and other telecommunications networks; and

    • “(ii) the level of investment in fibre, copper, wireless, and other telecommunications networks, and the ability of access providers to recover that investment within a reasonable period; and

    • “(iii) the ability of access providers to achieve, within a reasonable period, reasonable rates of return on their investment in telecommunications networks that adequately reflect the risks assumed by those access providers when the relevant investments were made; and

    • “(iv) the level of competition in relevant telecommunications markets; and

    • “(v) the effects of the regulatory framework under this Act on investment in fibre, copper, wireless, and other telecommunications networks, and on outcomes for end-users; and

    • “(vi) the sustainability of the regulatory framework under this Act, given developments in technology and convergence of traditional telecommunications markets; and

    • “(vii) the importance of any regulatory intervention being proportionate, having regard to the problems being addressed, the size of the relevant market, and the number and size of the potentially regulated entities; and

    • “(viii) developments in wireless solutions and whether they should be part of any telecommunications regulation; and

    • “(ix) experience in comparable jurisdictions and economic relations with Australia, weighed against what is appropriate for New Zealand conditions and the make-up and history of New Zealand's telecommunications markets; and

    • “(x) any other matters that the Minister considers relevant.

  “(4) The Minister must use his or her best endeavours to ensure that the review is completed no later than 31 March 2019.”

“Part 2A
“Structural separation of Telecom

“Subpart 1—Preliminary provisions

“69A Purpose of Part

• The purpose of this Part is to provide for matters relating to the structural separation of Telecom to facilitate—

  • “(a) the promotion of competition in telecommunications markets for the long-term benefit of end-users of telecommunications services in New Zealand; and

  • “(b) efficient investment in telecommunications infrastructure and services.

“69B Interpretation

• In this Part, unless the context otherwise requires,—

  “asset––

  • “(a) means property of any kind, whether or not situated in New Zealand, whether tangible or intangible, real or personal, corporeal or incorporeal, and whether or not subject to rights; and

  • “(b) includes––

    • “(i) estates or interests in any land, including rights of occupation of land or buildings:

    • “(ii) buildings, vehicles, plant, equipment, machinery, fixtures and fittings, and rights in them:

    • “(iii) choses in action and money:

    • “(iv) rights of any kind, and applications, objections, submissions, and appeals in respect of those rights:

    • “(v) intellectual property and applications pending for intellectual property:

    • “(vi) goodwill, and any business undertaking

  “Chorus—

  • “(a) means ChorusCo; and

  • “(b) includes any of its subsidiaries

  “ChorusCo means the company that is to be demerged from Telecom on separation day in accordance with the demerger arrangement

  “demerger arrangement means an arrangement approved by the court pursuant to Part 15 of the Companies Act 1993 on the application of Telecom involving the distribution of 100% of the ordinary shares held by Telecom Corporation of New Zealand Limited in ChorusCo to the holders (including a nominee for holders) of ordinary shares in Telecom Corporation of New Zealand Limited

  “liabilities means liabilities, debts, charges, duties, and obligations of every description, whether present or future, actual or contingent, and whether payable or to be observed or performed in New Zealand or elsewhere

  “related party has the meaning set out in section 69S

  “rights includes all rights, powers, privileges, interests, leases, licences, approvals, consents, designations, permissions, dispensations, authorisations, benefits, defences, immunities, claims, and equities of any kind, whether arising from, accruing under, created or evidenced by, or the subject of, an instrument or otherwise, and whether liquidated or unliquidated, actual, contingent, or prospective

  “separation day means the day on which Telecom Corporation of New Zealand Limited distributes 100% of the ordinary shares it holds in ChorusCo in accordance with the demerger arrangement.

“Subpart 2—Monitoring of shared assets, services, and systems

“69C Interpretation

• In this subpart, unless the context otherwise requires,—

  “arm's-length has the meaning set out in section 69D

  “executed, in relation to a sharing arrangement or a material amendment to a sharing arrangement, means signed under the name of the relevant company by a person acting under the company's authority

  “sharing arrangement—

  • “(a) means an arrangement, agreement, contract, or understanding between Telecom and Chorus for the purpose of providing either or both with access to, or continued use of, a system, asset, or service that is owned or controlled by Telecom at the close of the day before separation day; and

  • “(b) includes an arrangement, agreement, contract, or understanding of the kind described in paragraph (a) that is conducted with or through a third party; but

  • “(c) does not include any of the following, or anything that is wholly in accordance with the following:

    • “(i) the regulated terms of supply of a designated service or a specified service; or

    • “(ii) a registered undertaking; or

    • “(iii) an undertaking under Part 4AA; or

    • “(iv) a deemed TSO instrument; or

    • “(v) an undertaking approved in accordance with subpart 4 of this Part (undertakings by Chorus); or

    • “(vi) an arrangement that is exempted under section 69N.; or

    • “(vii) an arrangement that relates to ensuring compliance by Telecom, Chorus, or both with—

      • “(A) the duties imposed by the Telecommunications (Interception Capability) Act 2004 on a network operator (within the meaning of that Act); or

      • “(B) duties or requirements imposed by any other Act, interception warrant, or other lawful authority that relate to the interception of communications.

“69D Meaning of arm's-length

• “Without limiting the ordinary meaning of the expression, arm's-length includes having relationships, dealings, and transactions that—

  • “(a) do not include elements that parties in their respective positions would usually omit; and

  • “(b) do not omit elements that parties in their respective positions would usually include,—

  “if the parties were—

  • “(c) connected or related only by the transaction or dealing in question; and

  • “(d) acting independently; and

  • “(e) each acting in its own best interests.

“69E Requirements for sharing arrangements

• “(1) Every sharing arrangement must—

  • “(a) be recorded in writing and be executed by Telecom and Chorus; and

  • “(b) be on arm's-length terms between Telecom and Chorus; and

  • “(c) be unlikely to harm competition in any telecommunications market; and

  • “(d) ensure the protection of confidential commercial and customer information.

  “(2) Telecom and Chorus must not enter into a sharing arrangement unless the arrangement meets the requirements in subsection (1).

“69F Commission must be notified of proposed and final sharing arrangements

• “(1) Telecom and Chorus must,—

  • “(a) not later than 10 working days after separation day, provide a copy of all sharing arrangements executed before separation day to the Commission; and

  • “(b) if a sharing arrangement is entered into after separation day,—

    • “(i) not later than 10 working days before the sharing arrangement is executed, notify the Commission of their intention to enter into the sharing arrangement and provide a copy of the proposed arrangement to the Commission; and

    • “(ii) not later than 10 working days after the final sharing arrangement is executed, provide a copy of the arrangement to the Commission.

  “(2) Subsection (1) applies to any material amendment to a sharing arrangement as if that amendment were a sharing arrangement.

  “(3) See sections 156L(3) and 156M for the maximum penalty of $1 million (and $50,000 per day) for breach of this section.

“69G Obligation to collect and retain information for monitoring purposes

• Telecom and Chorus must each collect and retain information relating to the operation and performance of a sharing arrangement for the purpose of enabling the Commission to monitor compliance with this subpart.

“69H Commission's monitoring, investigation, and enforcement powers

• “(1) The Commission may, by notice in writing, require Telecom and Chorus to prepare and disclose information consisting of, or about, the following:

  • “(a) the terms, execution, or performance of a sharing arrangement:

  • “(b) any report, agreement, or other information relating to the sharing arrangement that the Commission considers necessary for the purpose of monitoring compliance with this subpart.

  “(2) Telecom and Chorus must prepare and disclose the information required within the period specified in the notice.

  “(3) A notice under this section may require either or both of the following:

  • “(a) that all or any of the information be audited by a qualified auditor and that the auditor provide a report directly to the Commission on the matters that the Commission specifies as those that must be addressed in that report:

  • “(b) that all or any of the information be verified by statutory declaration in the form and by the persons required by the Commission.

  “(4) To avoid doubt, nothing in this section limits the application of section 98 of the Commerce Act 1986.

  “(4A) The Commission may, for the purpose of monitoring, investigation, and enforcement under this subpart, consult with any persons that the Commission considers may be affected by a sharing arrangement.

  “(5) See sections 156L(3) and 156M for the maximum penalty of $1 million (and $50,000 per day) for breach of this section.

“69I Commission may give non-compliance notice

• “(1) This section applies if the Commission considers that Telecom and Chorus are parties to a sharing arrangement that contravenes section 69E (a non-compliance).

  “(2) The Commission may give written notice to each party (a non-compliance notice) setting out—

  • “(a) the nature of the non-compliance; and

  • “(b) the 10-day time limit for responses in section 69J; and

  • “(c) the 40-day time limit for rectification and enforcement (see section 69K).

“69J Process for responding to non-compliance notice

• “(1) Each party may, not later than 10 working days after the date of the non-compliance notice or any further time as the Commission may allow, respond in writing to the notice either—

  • “(a) by disputing the notice; or

  • “(b) by setting out the reasons for the non-compliance.

  “(2) The Commission must consider each party's response (if any) before deciding what action to take under subsection (3).

  “(3) The Commission must, not later than 10 working days after the final date for the parties to respond to the non-compliance notice under subsection (1),—

  • “(a) retract the non-compliance notice; or

  • “(b) give a revised non-compliance notice; or

  • “(c) confirm the non-compliance notice.

  “(4) If the Commission gives a revised non-compliance notice, or confirms the non-compliance notice, the Commission must—

  • “(a) set out the nature of the non-compliance; and

  • “(b) require the parties to rectify the non-compliance.

“69K Commission may decide on appropriate enforcement action if non-compliance persists

• “(1) This section applies if the Commission considers that a non-compliance has not been rectified within 40 working days after the date of a non-compliance notice given under section 69I.

  “(2) The Commission may, at any time, do all or any of the following:

  • “(a) direct Telecom and Chorus to amend the sharing arrangement in order to rectify the non-compliance within 10 working days of the direction (an amendment direction):

  • “(b) apply for an injunction under section 69M in respect of the non-compliance or a failure to comply with an amendment direction:

  • “(c) seek a pecuniary penalty under Part 4A in respect of the non-compliance or a failure to comply with an amendment direction.

  “(3) The Commission must give written notice of each decision to each party affected by the decision.

“69L Application of pecuniary penalty provisions

• “(1) Sections 156L and 156M apply to a party to a sharing arrangement who, without reasonable excuse, fails to rectify a non-compliance, or fails to comply with an amendment direction, in respect of which the Commission decides to take enforcement action under section 69K(2)(c).

  “(2) See sections 156L(3) and 156M for the maximum penalty of $10 million (and $500,000 per day) for breach of this section.

“69M Injunction may be granted by High Court

• “(1) If the High Court is satisfied that a non-compliance has not been rectified within 40 working days after the date of a non-compliance notice under section 69I, the court may, on the application of the Commission, grant an injunction restraining Telecom and Chorus from further performing the sharing arrangement or engaging in any conduct for the purpose of giving effect to that arrangement.

  “(2) If the High Court is satisfied that there has been a failure to comply with a direction of the Commission given under section 69K(2)(a), the court may, on the application of the Commission, grant an injunction requiring Telecom and Chorus to comply with the direction of the Commission.

  “(3) In any proceeding under this section, the Commission, on the order of the court, may obtain discovery and administer interrogatories.

  “(4) The court may at any time rescind or vary an order made under this section.

“69N Minister may grant exemption from application of subpart

• “(1) The Minister may, by notice in the Gazette, exempt a sharing arrangement or class of sharing arrangements from the application of this subpart, if the Minister is satisfied that—

  • “(a) any potential harm to competition in telecommunications markets would be likely to be trivial or inconsequential; and

  • “(b) commercial information or customer confidential information would not be disclosed.

  “(2) The Minister must consult the Commission before granting an exemption under this section.

  “(3) The exemption takes effect from the date specified in the exemption (which may not be earlier than the date of the Gazette notice).

  “(4) The Minister may grant the exemption on any terms and conditions that the Minister thinks fit.

  “(5) The Minister may, in like manner, vary or revoke such an exemption.

  “(6) An exemption under this section is a regulation for the purposes of the Regulations (Disallowance) Act 1989 but not for the purposes of the Acts and Regulations Publication Act 1989.

  “(7) Telecom and Chorus must ensure that all exemptions granted under this section are available at all reasonable times, free of charge, on the Internet sites maintained by or on behalf of Telecom and Chorus.

“Subpart 3—Line of business restrictions

“69O No participation in supply of retail services

• “(1) Chorus, or any related party of Chorus, must not participate in the supply of a telecommunications service to a person (A) if 25% or more of the services supplied, or to be supplied, by Chorus to A in any year are or will be supplied—

  • “(a) for A’s own use or consumption; or

  • “(b) for the use or consumption of persons who are related parties of A.

  “(2) See sections 156L(3) and 156M for the maximum penalty of $10 million (and $500,000 per day) for breach of this section.

“69P Register of non-retail users

• “(1) The Commission must maintain a register of users for the purposes of section 69O.

  “(2) If the name of the user appears on the register maintained by the Commission under this section, it is conclusive evidence of the fact that Chorus does not breach section 69O by supplying to that person.

  “(3) Chorus or any user of telecommunications services may make a written application to the Commission (in a form required by the Commission, if any) for a name of a user to be entered on the register.

  “(4) The Commission must give public notice of the application as soon as practicable after receiving it.

  “(5) The Commission must, within 15 working days of receiving the application, enter the name of the user on the register if the Commission is satisfied that Chorus would not breach section 69O by supplying to that person.

  “(6) At separation day, the register must include all of Chorus's existing unbundled copper local loop customers and unbundled bitstream access customers as at separation day, as notified to the Commission by Chorus before separation day.

  “(7) The Commission must, at all reasonable times, make the register available for inspection on the Commission's Internet site in an electronic form that is publicly accessible.

“69Q Variations to, and removals from, register

• “(1) The Commission may, at any time,—

  • “(a) review and correct the register maintained under section 69P; and

  • “(b) remove the names of users from the register if—

    • “(i) the Commission ceases to be satisfied of the matters in section 69P(5); or

    • “(ii) the Commission is satisfied that the user is insolvent or has ceased business.

  “(2) However, the Commission must give Chorus and the user—

  • “(a) notice of its intention to remove the user from the register, and a reasonable opportunity to comment before removing a name from the register; and

  • “(b) notice that the name has been removed, as soon as practicable after removal.

  “(3) Chorus is not in breach of section 69O to the extent that it continues to supply a service to a user within the 6-month period following the removal of the user's name from the register.

“69QA No services above layer 2

• “(1) Every undertaking entered into by Chorus in favour of the Crown under subpart 4 of this Part or Part 4AA must include a prohibition on participation by Chorus, or any related party of Chorus, in services above layer 2 services.

  “(2) In this section, unless the context otherwise requires, layer 2 services has the same meaning as in the document ‘New Zealand Government Ultra-Fast Broadband Initiative Invitation to Participate in Partner Selection Process’ dated October 2009 (as amended).

  “(3) This Act applies to an undertaking required under this section as if the undertaking were required under subpart 4 of this Part or Part 4AA, as the case may be.

“69QB No end-to-end services

• “(1) Chorus, or any related party of Chorus, must not provide telecommunications links to customers except—

  • “(a) between an end-user’s building (or, in the case of a commercial building, the 2 building distribution frames) and a Chorus local or regional aggregation point; and

  • “(b) between 2 Chorus local or regional aggregation points.

  “(2) To avoid doubt,—

  • “(a) telecommunications links provided by Chorus, or a related party of Chorus, to customers must terminate at a local or regional aggregation point; and

  • “(b) Chorus, or a related party of Chorus, must not sell a service to customers that links 2 or more end-user sites together (but a customer of Chorus can create the linking between 2 or more end-user sites).

  “(3) However, this section does not prevent the resale of PSTN-based services for the purposes of acting as a channel to market for Telecom.

  “(4) See sections 156L(3) and 156M for the maximum penalty of $10 million (and $500,000 per day) for breach of this section.

“69R Enforcement of breaches of sections 69O and 69QB

• Sections 69T (injunctions) and 156B (enforcement actions) apply to Chorus, and any related party of Chorus, that, without reasonable excuse, participates in the supply of a telecommunications service in breach of sections 69O and 69QB.

“69S Application of line of business restrictions to related parties of Chorus

• “(1) The test for related parties in this Part is that a person is related to another person if—

  • “(a) they are acting jointly or in concert; or

  • “(b) either person acts, or is accustomed to act, in accordance with the wishes of the other person; or

  • “(c) they are related companies within the meaning of section 2(3) of the Companies Act 1993; or

  • “(d) either person is able, directly or indirectly, to exert a substantial degree of influence over the activities of the other; or

  • “(e) they are both, directly or indirectly, under the control of the same person.

  “(1A) However, for the purposes of subsection (1),—

  • “(a) a director of a company or other body corporate is not related to that company or body corporate merely because he or she is a director of that company or body corporate; and

  • “(b) a person is not able to exert a substantial degree of influence over another person merely because—

    • “(i) those persons are in competition in the same market; or

    • “(ii) one of them supplies goods or services to the other.

  “(2) Any sharing of assets, services, and systems between Chorus and Telecom must be disregarded for the purposes of applying subsection (1) to the extent that it is provided for in a sharing arrangement of which a copy has been provided to the Commission under section 69F(1)(a) or (b)(ii).

  “(3) Without limiting section 69O, Chorus is deemed to participate in the supply of a telecommunications service to an end-user of the service if a related party of Chorus participates in the supply of a telecommunications service to an end-user of a service.

  “(3) Without limiting section 69O, Chorus is deemed to participate in the supply of a telecommunications service if a related party of Chorus participates in the supply of the telecommunications service.

  “(4) The order of responsibility for remedying breaches is, to the extent practical, that the breach must be remedied first by the party whose activity resulted in the breach.

  “Compare: 1993 No 106, s 4A(2), 1998 No 88 s 21

“69T Injunctions may be granted by High Court for certain contraventions

• “(1) The High Court may, on the application of the Commission, grant an injunction restraining a person from engaging in a breach of sections 69O or 69QB.

  “(2) The High Court may, at any time, rescind or vary an injunction granted under this section.

“Subpart 4—Undertakings by Chorus

“69U Purposes of subpart

• The purposes of this subpart are to—

  • “(a) promote competition in telecommunications markets for the long-term benefit of end-users of telecommunications services in New Zealand; and

  • “(b) require transparency, non-discrimination, and equivalence of supply in relation to certain telecommunications services; and

  • “(c) facilitate efficient investment in telecommunications infrastructure and services.

“69V Overview

• “(1) This subpart imposes obligations on Chorus to give undertakings—

  • “(a) to supply wholesale services using its copper access network (called relevant services in this subpart) on a non-discrimination basis; and

  • “(b) to supply a subset of those services, which Chorus consumes and which it supplies to its competitors, (called relevant regulated services in this subpart) on an equivalence basis.

  “(2) This section is intended only as a guide to the general scheme and effect of this subpart.

“69W Interpretation

• In this subpart, unless the context otherwise requires,—

  “equivalence, in relation to the supply of a relevant regulated service, means equivalence of supply of the service and access to Chorus’s network so that third-party access seekers are treated in the same way to Chorus’s own business operations, including in relation to pricing, procedures, operational support, and supply of information and other relevant matters

  “legacy access network—

  • “(a) means that part of Chorus's copper access network that connects the end-user's building to the handover point in—

    • “(i) Chorus's local exchange or distribution cabinet (or equivalent facility); or

    • “(ii) Chorus's first data switch (or equivalent facility) (including Chorus's local loop network and a digital subscriber line access multiplexer or equivalent facility); and

  • “(b) to avoid doubt, a part of Chorus's copper access network that is between the points referred to in paragraph (a) is not prevented from being a legacy access network because fibre assets are also used in that part of the network

  “legacy access network means the network comprising—

  • “(a) Chorus's local loop network, as defined in clause 1 of Part 1 of Schedule 1 (including any relevant line in Chorus's local telephone exchange or distribution cabinet); and

  • “(b) Chorus's local telephone exchange, as defined in clause 1 of Part 1 of Schedule 1, and Chorus's distribution cabinet (or equivalent facility); and

  • “(c) Chorus's backhaul network (whether copper, fibre, or anything else) between the local loop network handover point in Chorus's distribution cabinet (or equivalent facility) or Chorus's local telephone exchange and the first data switch (including the first data switch); and

  • “(d) Chorus's digital subscriber line access multiplexer (or equivalent facility)

  “local access and calling service means the designated access service described in subpart 1 of Part 2 of Schedule 1 as local access and calling service offered by means of a fixed telecommunications network

  “non-discrimination, in relation to the supply of a relevant service, means that Chorus must not treat access seekers differently or, where Chorus supplies itself with a relevant service, must not treat itself differently from other access seekers, except to the extent that a particular difference in treatment is objectively justifiable and does not harm, and is unlikely to harm, competition in any telecommunications market

  “relevant regulated services means the following designated access services:

  • “(a) Chorus's unbundled copper local loop network service:

  • “(b) Chorus's unbundled copper local loop network co-location service:

  • “(c) Chorus's unbundled copper local loop network backhaul (distribution cabinet to telephone exchange):

  • “(d) Chorus's unbundled copper local loop network backhaul (telephone exchange to interconnect point)

  “relevant services—

  • “(a) means—

    • “(i) wholesale telecommunications services that are provided using, or that provide access to the unbundled elements of, the legacy access network; and

    • “(ii) the designated access service described in subpart 1 of Part 2 of Schedule 1 as Chorus's unbundled bitstream access backhaul; but

  • “(b) does not include any services that are agreed by the Commission in writing to be legacy input services, being inputs to services that are no longer offered to end-users other than customers who were end-users before separation day

  “UBA service means the designated access service described in subpart 1 of Part 2 of Schedule 1 as unbundled bitstream access service.

“69X Requirements for undertakings by Chorus relating to supply of certain wholesale telecommunications services

• Chorus must give undertakings that—

  • “(a) require Chorus to achieve non-discrimination in relation to the supply of relevant services; and

  • “(b) set out rules and principles that Chorus will apply to ensure that non-discrimination is achieved in relation to the supply of relevant services; and

  • “(c) require Chorus to achieve equivalence of supply in relation to relevant regulated services; and

  • “(d) require Chorus to develop, in consultation with the Commission and key industry stakeholders, key performance indicators for systems and processes for relevant regulated services by which it may be judged whether Chorus is achieving equivalence of supply in relation to those services; and

  • “(e) require Chorus to develop, in consultation with the Commission and key industry stakeholders, key performance indicators by which it may be judged whether Chorus is achieving non-discrimination in relation to the supply of the UBA service; and

  • “(f) require Chorus to—

    • “(i) conduct quarterly reviews of performance as measured against the key performance indicators referred to in paragraphs (d) and (e); and

    • “(ii) make all information relating to those reviews available to the Commission to support the Commission’s assessment of compliance with the undertakings; and

    • “(iii) publish quarterly reports on its performance as measured against the key performance indicators referred to in paragraphs (d) and (e); and

    • “(iv) internally audit the controls and processes behind the key performance indicator reporting; and

  • “(g) require Chorus to carry out quarterly customer surveys of its performance in relation to relevant regulated services; and

  • “(h) require Chorus to—

    • “(i) implement a policy of control of commercial information provided by access seekers for relevant services and relevant regulated services, in consultation with the Commission; and

    • “(ii) internally audit the effectiveness of that policy, at the end of each of the first two 6-month periods following separation day and then annually after that; and

  • “(i) require Chorus to supply the UBA service in a bundle with the local access and calling service; and

  • “(j) require the directors of Chorus to certify that Chorus has complied with the undertakings; and

  • “(k) provide for disclosure of relevant information to the Commission, to support the Commission's assessment of compliance with the undertakings; and

  • “(l) require Chorus to commit to a reasonable timetable plan containing time frames for a transition to the end of the sharing arrangements referred to in subpart 2.

“69XA Implementation of Chorus undertakings

• “(1) On and from separation day, the undertakings approved by the Minister on or before separation day under sections 23GB to 23GD of the Telecommunications (TSO, Broadband, and Other Matters) Amendment Act 2010 take effect as if they were a deed that is—

  • “(a) properly executed by, and binding on, Chorus; and

  • “(b) given in favour of the Crown.

  “(2) The undertakings approved by the Minister after separation day under sections 23GB to 23GD of that Act take effect in accordance with subsection (1), but with effect from the date of approval.

“69XB Chorus must publish Chorus undertakings

• “(1) As soon as practicable after the date on which an undertaking takes effect under section 69XA, Chorus must publish the undertaking.

  “(2) Section 156AM applies with necessary modifications.

“69XC Variation of Chorus undertakings

• Sections 156AN to 156AOA apply with necessary modifications to undertakings under this subpart.

“69XD Termination of Chorus undertakings

• Section 156AQ applies with necessary modifications to undertakings under this subpart.

“69XE Enforcement of Chorus undertakings

• “(1) Sections 156AS to 156AU apply with necessary modifications to undertakings under this subpart.

  “(2) See sections 156L(3) and 156M for the maximum penalty of $10 million (and $500,000 per day) for failure to comply with undertakings).

“Subpart 5—Miscellaneous

“Public Works Act 1981

“69XF Application of Public Works Act 1981

• “(1) Despite section 4(4) of the Finance Act 1990 and section 24(4) of the State-Owned Enterprises Act 1986, nothing in sections 40 to 42 of the Public Works Act 1981 applies to the transfer of affected land from Telecom to Chorus.

  “(2) However, after that transfer, sections 40 and 41 of the Public Works Act 1981 apply to that land as if Chorus were the Crown and the transfer of the land from the Crown to Telecom and from Telecom to Chorus had not taken place.

  “(3) If, in relation to affected land that has been transferred by Telecom to Chorus, an offer made by Chorus under section 40(2) of the Public Works Act 1981 is not accepted within the time specified in subsection (4) and the parties have not agreed on other terms for the sale of the land, Chorus may sell or otherwise dispose of the land to any person and on such terms and conditions as it thinks fit.

  “(4) The time referred to in subsection (3) is the later of the following:

  • “(a) 40 working days after the offer is made or such further period as Chorus considers reasonable:

  • “(b) if an application has been made to the Land Valuation Tribunal pursuant to section 40(2A) of the Public Works Act 1981, 20 working days after the determination of the Tribunal.

  “(5) In this section,—

  “affected land means any land that, immediately before it was transferred by the Crown to Telecom pursuant to section 4(4) of the Finance Act 1990, was held by the Crown under the Public Works Act 1981 for a public work

  “land has the same meaning as in section 2 of the Public Works Act 1981

  “working day has the same meaning as in section 2 of the Public Works Act 1981.

“Resource Management Act 1991 issues

“69XG Requiring authority status under Resource Management Act 1991

• “(1) Chorus is approved as a requiring authority, as a network utility operator, under the Resource Management Act 1991 for the following purposes:

  • “(a) constructing or operating, or proposing to construct or operate, a network for the purpose of telecommunication as defined in section 5 of this Act; and

  • “(b) constructing or operating, or proposing to construct or operate, a network for the purpose of radiocommunications as defined in section 2(1) of the Radiocommunications Act 1989.

  “(2) Part 8 of the Resource Management Act 1991 applies with necessary modifications as if the approval had been given under section 167 of that Act.

“69XH Designations under Resource Management Act 1991

• “(1) The Minister may, before separation day, by notice in the Gazette, issue 2 lists comprising all or any of the designations (within the meaning of section 166 of the Resource Management Act 1991) for which Telecom is responsible, as follows:

  • “(a) designations that are to be transferred to Chorus:

  • “(b) designations that are to be additionally granted back to Telecom.

  “(2) On separation day,—

  • “(a) all the rights and responsibilities of Telecom in relation to the designations listed in a Gazette notice under subsection (1)(a), as they existed immediately before separation day, are transferred to Chorus for the purposes of section 180 of the Resource Management Act 1991; and

  • “(b) the designations listed in a Gazette notice under subsection (1)(b), as they existed immediately before separation day, are (in addition to being transferred to Chorus) granted back to Telecom, with the effect that, subject to subsection (3), Telecom continues to have the same rights and responsibilities as Chorus in relation to the designations.

  “(3) For the purposes of section 177 of the Resource Management Act 1991,—

  • “(a) the designations transferred to Chorus under subsection (2)(a) are treated as earlier designations; and

  • “(b) the additional designations granted to Telecom under subsection (2)(b) are treated as later designations.

  “(4) Part 8 of the Resource Management 1991 applies with necessary modifications as if the designations had been transferred or made under that Part.

“Restrictive covenants

“69XI Certain restrictive covenants

• “(1) This section applies to any restrictive covenant that is registered in favour of land—

  • “(a) of which Telecom was a registered proprietor immediately before separation day; and

  • “(b) that is transferred from Telecom to Chorus on separation day.

  “(2) Despite the transfer of land to Chorus, Telecom is entitled to enforce the covenant against the persons bound by the covenant as if Telecom were an owner or occupier of the land.

  “(3) This section does not limit the rights to enforce the covenant of Chorus, Chorus’s successors in title, and persons claiming through Chorus or Chorus’s successors in title.

  “(4) The Registrar-General may enter in the register relating to the burdened land, the benefited land, or both, a notification of the effect of this section as if it were an instrument.

“Government Superannuation Fund Act 1956

“69XJ Protection of existing members of Government Superannuation Fund

• “(1) The Government Superannuation Fund Act 1956 continues to apply to the persons referred to in subsection (2) in all respects as if service with Chorus were Government service.

  “(2) The persons are every person who, immediately before separation day,—

  • “(a) is employed by Telecom; and

  • “(b) is deemed to be employed in the Government service under section 2A of the Government Superannuation Fund Act 1956; and

  • “(c) is a contributor to the Government Superannuation Fund under Part 2 or 2A of that Act.

  “(3) For the purpose of applying the Government Superannuation Fund Act 1956, the chief executive of Chorus is the controlling authority.

“Subpart 6—Taxation consequences of structural separation

“69XK Interpretation in this subpart

• In this subpart, unless the context requires otherwise,––

  “appointed day means,––

  • “(a) for a purpose specified in a proposal approved by Order in Council made under section 23GDB of the Telecommunications (TSO, Broadband, and Other Matters) Amendment Act 2010, a day specified in that proposal for that purpose:

  • “(b) if there is no relevant day under paragraph (a), the day on which the vesting of the designated assets and liabilities, and the demerger distribution, take effect

  “Chorus company means a member of the group of companies comprising ChorusCo and the companies that are, or will be, its subsidiaries immediately following the demerger distribution and the vesting of the designated assets and liabilities

  “demerger distribution means a distribution, or an entitlement to a distribution, to each holder of ordinary shares in Telecom Corporation of New Zealand Limited, where the distribution or entitlement––

  • “(a) arises under the demerger arrangement; and

  • “(b) comprises––

    • “(i) an amount determined by reference to the value of a holder's entitlement to ordinary shares in ChorusCo:

    • “(ii) ordinary shares in ChorusCo to which the holder is entitled, or proceeds from the disposal of that holder's entitlement to ordinary shares in ChorusCo

  “designated assets and liabilities means assets and liabilities, or parts of assets and liabilities, as the case may be, specified in an Order in Council made under section 23GDB of the Telecommunications (TSO, Broadband, and Other Matters) Amendment Act 2010, and designated assets and designated liabilities have corresponding meanings

  “income year has the same meaning as in the Income Tax Act 2007

  “Inland Revenue Acts has the same meaning as in the Tax Administration Act 1994

  “Telecom company means a member of the group of companies comprising Telecom Corporation of New Zealand Limited and the companies that are, or will be, its subsidiaries immediately following the demerger distribution and the vesting of the designated assets and liabilities

  “vest means the transfer of the designated assets and liabilities from a Telecom company to a Chorus company on the appointed day

  “vesting year means the income year that includes the appointed day for the vesting of the designated assets and liabilities.

“69XL Purpose

• The purpose of this subpart is to ensure that––

  • “(a) the vesting of the designated assets and liabilities in Chorus does not give rise to tax consequences under the Inland Revenue Acts for Telecom or Chorus that would not have arisen if they were the same person:

  • “(b) no tax consequences arise under the Inland Revenue Acts on the appointed day for any shareholder of Telecom Corporation of New Zealand Limited or Chorus from the demerger distribution that would not have arisen if the vesting of the designated assets and liabilities and the demerger distribution had not occurred.

“69XM Depreciation

• “(1) For the purposes of the Income Tax Act 2007, for a designated asset (the asset) that is depreciable property,—

  • “(a) the relevant Telecom company has a deduction for an amount of depreciation loss for the period beginning on the first day of the vesting year and ending on the day before the appointed day:

  • “(b) the relevant Telecom company does not derive depreciation recovery income and does not have a deduction for an amount of depreciation loss under sections EE 44 to EE 52 of the Income Tax Act 2007 as a result of the vesting of the asset:

  • “(c) the relevant Chorus company must calculate, on and after the appointed day, depreciation recovery income and deductions for amounts of depreciation loss as if, in respect of the period up to and including the appointed day, it and the Telecom company were the same person.

  “(2) In this section, depreciable property, depreciation loss, and depreciation recovery income have the same meanings as in the Income Tax Act 2007.

“69XN Tax effect of distribution of ChorusCo shares

• “(1) For the purposes of the Income Tax Act 2007, the following transactions do not give rise to, and are ignored for the purposes of calculating, the available subscribed capital of a Chorus company or a Telecom company:

  • “(a) the vesting of the designated assets and liabilities:

  • “(b) the demerger distribution:

  • “(c) a transaction necessary for carrying into effect the vesting of the designated assets and liabilities, or the demerger distribution, if, for that transaction, there is no party other than Chorus companies and Telecom companies.

  “(2) The demerger distribution on the appointed day––

  • “(a) is not a dividend or other kind of assessable income for the purposes of the Income Tax Act 2007:

  • “(b) is not a dutiable gift for the purposes of the Estate and Gift Duties Act 1968:

  • “(c) is, for any relevant Telecom company, a disposition for the cost price of the share, for the purposes of the Income Tax Act 2007.

  “(3) For the purposes of the Income Tax Act 2007, a person who receives a demerger distribution by virtue of holding a Telecom Corporation of New Zealand Limited share or shares is treated as––

  • “(a) acquiring the relevant ChorusCo share or shares at the same time and for the same purposes as the Telecom Corporation of New Zealand Limited share or shares that give rise to that person's entitlement to the demerger distribution:

  • “(b) having paid the amount given by subsection (4) for the acquisition of the ChorusCo share or shares:

  • “(c) having paid the amount given by subsection (5) for the acquisition of the Telecom Corporation of New Zealand Limited share or shares.

  “(4) For the purposes of subsection (3)(b), the amount paid for the acquisition is calculated using the following formula:

  	pre-calculation amount paid		×		Chorus mv
  	combined mv

  “(5) For the purposes of subsection (3)(c), the amount paid for the acquisition is calculated using the following formula:

  	pre-calculation amount paid		×		Telecom mv
  	combined mv

  “(6) In the formulas in subsections (4) and (5),––

  • “(a) pre-calculation amount paid is the person's expenditure or loss incurred in acquiring the relevant Telecom Corporation of New Zealand Limited share or shares, ignoring this section:

  • “(b) Chorus mv is the market capitalisation of ChorusCo calculated in the manner prescribed in a proposal approved by Order in Council under section 23GDB of the Telecommunications (TSO, Broadband, and Other Matters) Amendment Act 2010, or, if none is prescribed, the number of ChorusCo shares on issue immediately following the demerger distribution multiplied by the volume weighted average price of ChorusCo shares as traded on the NZSX over the first 5 trading days commencing on the date of listing of ChorusCo:

  • “(c) Telecom mv is the market capitalisation of Telecom Corporation of New Zealand Limited calculated in the manner prescribed in a proposal approved by Order in Council under section 23GDB of the Telecommunications (TSO, Broadband, and Other Matters) Amendment Act 2010, or, if none is prescribed, the number of Telecom Corporation of New Zealand Limited shares on issue immediately following the demerger distribution multiplied by the volume weighted average price of Telecom Corporation of New Zealand Limited shares as traded on the NZSX over the first 5 trading days commencing on the date of listing of ChorusCo:

  • “(d) combined mv is the total market capitalisation of ChorusCo and of Telecom Corporation of New Zealand Limited calculated in the manner prescribed in a proposal approved by Order in Council under section 23GDB of the Telecommunications (TSO, Broadband, and Other Matters) Amendment Act 2010, or, if none is prescribed, the total of the market capitalisation of ChorusCo and of Telecom Corporation of New Zealand Limited determined in accordance with paragraphs (b) and (c).

  “(7) Subsection (8) applies where––

  • “(a) an arrangement entered into on or before the appointed day would, but for the demerger distribution, be a returning share transfer or share-lending arrangement in respect of which the original share is a Telecom Corporation of New Zealand Limited share; and

  • “(b) if, under the relevant arrangement in respect of the Telecom Corporation of New Zealand Limited share, the share user is required to transfer a Telecom Corporation of New Zealand Limited share or shares and a ChorusCo share or shares to the share supplier.

  “(8) If subsection (7) applies,––

  • “(a) the relevant ChorusCo share or shares are treated as part of the relevant Telecom Corporation of New Zealand Limited share or shares for the purposes of the definitions of identical share, original share, returning share transfer, and share-lending arrangement in the Income Tax Act 2007:

  • “(b) subsection (3) applies to the share supplier as if the share supplier were the person referred to in that subsection.

  “(9) In this section, available subscribed capital, dividend, identical share, original share, returning share transfer, share-lending arrangement, share supplier, and share user have the same meanings as in the Income Tax Act 2007.

“69XO Goods and Services Tax Act 1985

• “(1) The vesting of the designated assets and liabilities is treated as being a taxable supply on the appointed day that is charged with tax at the rate of 0% for the purposes of the Goods and Services Tax Act 1985.

  “(2) For the purpose of calculating, under the Goods and Services Tax Act 1985, the amount of tax payable, or input tax deductible, on or after the appointed day by a Chorus company in respect of, or in relation to, a designated asset or a designated liability, the Chorus company and the relevant Telecom company are treated as if they were the same person in respect of the period up to and including the appointed day, subject to subsection (1).

  “(3) If it is necessary for a tax invoice, a credit note, or a debit note (the document) to be issued by or to a Telecom company in respect of a supply made by or to a Telecom company before the appointed day, the document may be issued by or to a Chorus company if the supply was in respect of or in relation to designated assets and liabilities. The Chorus company and the Telecom company are treated as if, in relation to that supply, they were the same person for the purposes of any requirement in the Goods and Services Tax Act 1985 that the Telecom company holds, has previously been issued with, or has issued to a person, a tax invoice, a debit note, or a credit note for the supply.

  “(4) In this section, credit note, debit note, input tax, supply, tax, and tax invoice have the same meanings as in the Goods and Services Tax Act 1985.

“69XP Prepayments

• “(1) For the purposes of the Income Tax Act 2007,––

  • “(a) for the vesting year, the relevant Telecom company is treated as having an unexpired amount of expenditure under section EA 3 of that Act (the unexpired portion) for expenditure connected with the designated assets and liabilities, calculated by applying section EA 3(4) to (7) of that Act as if the day before the appointed day were the end of an income year:

  • “(b) the relevant Telecom company has, for the vesting year, income under section CH 2 of that Act for the unexpired portion described in paragraph (a):

  • “(c) for an income year starting after the appointed day, the relevant Telecom company is not allowed a deduction for the unexpired portion under section DB 50 of that Act, and no part of the unexpired portion is income under section CH 2 of that Act:

  • “(d) the relevant Chorus company has, for the vesting year, a deduction for the unexpired portion described in paragraph (a) under section DB 50 of that Act:

  • “(e) for the vesting year and any subsequent income year, section EA 3 of that Act applies to the relevant Chorus company as if that member had been allowed a deduction under that Act for expenditure to which paragraph (a) applies.

  “(2) In this section, expenditure means expenditure that the relevant Telecom company has been allowed a deduction for under the Income Tax Act 2007 or an earlier Act, and that was not incurred on the items described in section EA 3(2) of that Act.

“69XQ Expenditure or loss incurred, and amounts derived

• A Chorus company and the relevant Telecom company are treated as the same person for the period prior to and including the appointed day for the purpose of determining the following, under the Income Tax Act 2007:

  • “(a) whether a deduction is allowed for an amount of expenditure or loss incurred by the Chorus company in connection with the designated assets or liabilities:

  • “(b) the amount of any deduction of the Chorus company in connection with the designated assets or liabilities:

  • “(c) whether an amount derived by the Chorus company in connection with the designated assets or liabilities is income:

  • “(d) the amount of any income of the Chorus company in connection with the designated assets or liabilities.

“69XR Bad debts

• Sections CG 3 and DB 31 of the Income Tax Act 2007 apply to a relevant Chorus company in respect of any obligation that is owed to the relevant Telecom company immediately before the appointed day and that vests in the Chorus company, as if the Telecom company and the Chorus company were the same person in respect of the period up to and including the appointed day.

“69XS Unpaid employment expenditure

• Sections DC 11(2) and (3) and EA 4(6) of the Income Tax Act 2007 apply to any amount of employment income (as that term is defined in the Income Tax Act 2007) that a Chorus company assumes the obligation to pay in connection with the vesting. For the purposes of those sections, the Chorus company is treated as person B, and the relevant Telecom company that incurred the obligation to pay is treated as person A.

“69XT Vesting of designated assets and liabilities

• The vesting of the designated assets and liabilities in a Chorus company—

  • “(a) does not give rise to a dutiable gift for the purposes of the Estate and Gift Duties Act 1968:

  • “(b) does not give rise to a dividend, or, except as provided in this subpart, other assessable income, for the purposes of the Income Tax Act 2007:

  • “(c) does not, except as provided in this subpart, give rise to a deduction for the purposes of the Income Tax Act 2007.

“69XU Revenue account property

• “(1) For the purposes of the Income Tax Act 2007, for a designated asset or liability that is revenue account property (the property), the property is treated as being disposed of by the relevant Telecom company and acquired by the relevant Chorus company for an amount equal to the property's tax book value.

  “(2) In this section, tax book value means,––

  • “(a) for the property, if it is trading stock or an excepted financial arrangement acquired by the relevant Telecom company before the vesting year, the opening value of the property under section DB 49 of the Income Tax Act 2007 for that Telecom company for the vesting year:

  • “(b) for the property, if paragraph (a) does not apply, the amount of expenditure or loss for which the relevant Telecom company is allowed a deduction in the vesting year as a result of the disposal.

  “(3) In this section, excepted financial arrangement, revenue account property, and trading stock have the same meaning as in the Income Tax Act 2007.

“69XV Leased assets

• For the purposes of the Income Tax Act 2007, for expenditure that a Telecom company incurs as a lessee under a lease that relates to a designated asset and to which section EJ 10 of the Income Tax Act 2007 applies,—

  • “(a) the Telecom company must calculate an amount to be allocated to the vesting year under section EJ 10(3) and (4) of that Act as if the day before the appointed day were the end of the vesting year:

  • “(b) the relevant Chorus company must calculate an amount to be allocated to the vesting year under section EJ 10(3) and (4) of that Act as if the appointed day were the start of the vesting year:

  • “(c) section EJ 10 of that Act applies to the Chorus company for income years after the vesting year as if, in respect of the period up to and including the appointed day, the Telecom company and the Chorus company were the same person.

“69XW Finance leases: financial arrangements rules

• “(1) For the purposes of the financial arrangements rules as defined in section EW 1(2) of the Income Tax Act 2007, for a finance lease that a Telecom company is party to immediately before the appointed day and vests in a Chorus company on the appointed day,––

  • “(a) if the finance lease is an asset of the Telecom company, the Chorus company is treated as paying to the Telecom company an amount of consideration for the finance lease that is equal to the tax book value of the finance lease on the relevant day:

  • “(b) if the finance lease is a liability of the Telecom company, the Telecom company is treated as paying to the Chorus company an amount of consideration for the finance lease that is equal to the tax book value of the finance lease on the relevant day:

  • “(c) the Telecom company must calculate, on the relevant day, a base price adjustment under section EW 31 of the Income Tax Act 2007:

  • “(d) if the Chorus company calculates, on or after the relevant day, a base price adjustment under section EW 31 of that Act, that base price adjustment must be calculated as if, in respect of the period up to and including the relevant day, it and the Telecom company were the same person:

  • “(e) sections EW 38, EW 42, and GB 21 of that Act do not apply for the vesting.

  “(2) In this section,––

  • “(a) finance lease has the same meaning as in the Income Tax Act 2007:

  • “(b) tax book value means, for the relevant day and a finance lease, the value for tax purposes of the finance lease on the relevant day determined consistently with the method used in subpart EW of the Income Tax Act 2007 to calculate and allocate income and expenditure under the finance lease as if the day immediately preceding the relevant day were the last day of an income year.

“69XX Approved issuer levy and administrative status

• “(1) For the purposes of the Income Tax Act 2007 and the Stamp and Cheque Duties Act 1971, a transaction or class of transactions registered as a registered security or as registered securities by a Telecom company on or prior to the appointed day is treated as also being registered as a registered security or as registered securities, as the case may be, by the relevant Chorus company. The relevant Chorus company is treated as an approved issuer in respect of the registered security or registered securities, as the case may be.

  “(2) The relevant Telecom company and the relevant Chorus company are treated as the same person, for the period prior to and including the appointed day, for the purposes of the making, giving, or receiving of any election, notice, certificate, and filing provided for under the Inland Revenue Acts.

  “(3) A Telecom company and the relevant Chorus company are treated as the same person for the purposes of receiving the benefit of––

  • “(a) a provisional rate, as defined in section EE 67 of the Income Tax Act 2007:

  • “(b) a special rate, as defined in section EE 67 of that Act.

  “(4) In this section, registered security has the same meaning as in the Income Tax Act 2007.”