Speaker by Various Artists


The Strange Tax on Your Internet

by Paul Brislen

When I first started as a tech reporter at Computerworld back in 1997 I remember one Russell Brown gleefully proposing a cover story that consisted mainly of quotes from then Minister of Communications Maurice Williamson threatening to take action over an issue if everyone didn’t simmer down a bit.

From memory, each quote would be accompanied by a picture of Maurice “with beard, without beard, with beard” and so on.

I’m not sure if it ran, but it certainly made an impression on me as a new reporter. Clearly whatever the issue was it had been going on a long time even then, and there was no sign of any resolution in sight.

The problem was Telecom and anyone over the age of 18 will remember the good/bad old days before we had a regulator.

What you can’t see is the nearly 600 words of history I’ve just deleted as being too tedious and too awful to repeat. Can I take it as read you all remember the transformation of the Post Office network arm into a rapacious company that paid out more in dividends to its American owners than would have been legal in America?

Today, that network is run by a company called Chorus. In 2010, Telecom split into two separate companies in order to compete for the giant pot of gold that is the “Ultra Fast Broadband” network that will deliver a fibre network to 75% of New Zealand homes and businesses.

Chorus is building about two thirds of the UFB and in exchange we’re giving Chorus an interest-free loan of nearly $1bn that doesn’t need to be repaid for quite some time.

But Chorus still owns the copper broadband network, and that's where the trouble starts.

I’ll apologise now for getting geeky in the next bit. I’ll try to keep it to a minimum.

As a monopoly, it’s fully regulated by the Telecommunications Commissioner, introduced in 2001 as a result of all the nonsense that went on in the 1990s under Maurice.

In the old days, the price of broadband was decided by the Commissioner on a “retail minus” model. That is, you worked out the average price for all the retail services, took off a margin and bingo! you had your wholesale price.

These days Chorus doesn’t have any retail services. It doesn’t sell to you and me, it sells to Vodafone and Telecom, Orcon and CallPlus and the like and they sell to us.

So the new Telco Act (introduced by Steven Joyce to make all this happen) says the Commissioner must move away from retail minus to “cost plus” which, just as the name suggests, involves finding the cost of service, adding a small margin and calling that your wholesale price.

Everyone knew this would result in a massive drop in the wholesale price of broadband. Retail providers were licking their chops at the thought. Internet users would get more bang for their buck which would be nice because New Zealand data caps are among the most ridiculous in the OECD.

In its draft decision, the Commission suggested a drop from $20 or so per line to about $8 or so per line.

Chorus cried foul. This would take $160m a year off its revenue, it said although we’ve not seen any proof to back that up.

The Minister of Communications, Amy Adams, launched a review of the Telecommunications Act. A discussion document has been released and in it are three options for dealing with this problem: The minister will pick the price; the minister will pick the price using a slightly different model or; the minister will tell the Commerce Commission what the price should be.

The outcome of these three options is exact the same – you will end up paying more for your broadband than you should. The price of your broadband is now being decided by Cabinet.

The government is taxing us $600m and giving it to a company that reported a $171m profit last year.

We think the Commerce Commission should be allowed to work out what the cost of service is in accordance with the law as it stands.

Chorus signed the contract - it should get on and do the job it has been paid to do.

We think the backroom renegotiation of the contract should be axed because it destabilises the entire industry and we think that you, the customers, should get the savings you were promised by Steven Joyce back in 2010.

The government needs to hear from you. Submissions on its draft discussion document are due in tomorrow – Friday the 13th – and you can email in your thoughts to . Better yet, let Amy Adams know what you think directly at .


Paul Brislen is the CEO of TUANZ and is @paulbrislen on Twitter

A broad-based "axe the tax" lobby groupthe Coalition for Fair Internet Pricing, will launch at 12.30pm today in Wellington.

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