The New Zealand government has released proposals to improve the rural fast broadband initiative, and reform the Telecommunications Service Obligations (TSO) levy that funds the plans for rural telecommunications.
The Communications and Information Technology Minister, Steven Joyce, confirmed that the delivery of fast broadband to rural communities is a priority for the government. "We're proposing to fund the NZD300m (USD217m) rural initiative through a combination of direct government funding and revenue from a more transparent and effective industry levy than the current TSO levy."
In a press release, he stated that the government will provide a direct contribution of NZD48m and further interim funding of up to NZD52m, with the remaining funding being sourced by replacing the existing TSO industry funding with a more transparent industry-wide mechanism that focuses on developing rural telecommunications.
Telecom New Zealand receives approximately NZD70m annually largely to compensate it for supplying local service to rural customers. This money is sourced from the industry via the TSO levy which is paid by market participants (including Telecom which contributes approximately 70%) on a market share basis.
Joyce said: "The existing TSO levy has been in place since 2001 and has been a source of considerable controversy within the industry. A recent review of the TSO had identified that the current methodology for assessing how much the TSO commitment was costing Telecom a year was flawed.”
“The current TSO levy methodology counts the costs Telecom incurs but does not include the full range of benefits Telecom derives from the TSO,” he continued. “The government is proposing to change the methodology for how much Telecom is compensated for uneconomic customers."
The government’s proposal is that a new telecommunications development levy, to be introduced from 2010-11, would consolidate existing TSO levies and be applied to industry on the same basis as TSO levies are currently. The revenue collected by the new levy would be allocated to pay TSO charges for the existing TSO instruments (Local Service TSO and Relay Service TSO1), make grants to improve the emergency call system, and make grants to assist the deployment of rural telecommunications infrastructure. The amount of levy revenue available to improve rural telecommunications would depend on how much residual funding remains after those TSO charges are paid.
Joyce added that the new levy would look to recover around NZD50m annually over the next six years - about NZD20m less than is currently the case.
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