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Commission asked to look again at TSO calculation

Fuseworks Media
Fuseworks Media

Wellington, April 8 NZPA - Vodafone won and Telecom lost in separate High Court judgments on matters relating to the so-called Telecommunications Service Obligation (TSO) today.

Since Telecom was privatised it has been obliged to maintain certain local residential telephone services, including to rural areas. The obligation originally known as the Kiwi Share was succeeded by the TSO in 2001. The Commerce Commission calculates the cost to Telecom of providing commercially non-viable services and rivals such as Vodafone and TelstraClear contribute to that cost.

Vodafone has won a case in the High Court challenging its contribution in the 2004/05 and 2005/06 years.

Vodafone argued the commission made both legal and procedural errors when calculating what it should pay.

The High Court ruled that the two determinations by the commission be set aside and referred back to the commission for reconsideration.

Though the court declined a Vodafone request to direct the commission to reconsider a net cost calculation to take into account the existence of alternative technologies.

"It is for the commission to fulfil its task under the act in accordance with the terms of the act," Justice Helen Winklemann said.

Vodafone corporate affairs general manager Tom Chignell said the ball was now in the commission's court.

"It will have to review its approach to cost modelling not only for these determinations but potentially for all of the other TSO determinations as well," he said.

Vodafone is also challenging the 2006/2007 and 2007/2008 decisions in the High Court. A draft determination for the 2008/2009 year has been released.

In a separate High Court judgment, Telecom was unsuccessful in appeal and judicial review applications. It argued that rates of return set by the commission were too low.

Telecom's group general counsel Tristan Gilbertson said the judgment in favour of Vodafone appeared to be inconsistent with a recent Court of Appeal decision in a related case.

Telecom saw merit in having all TSO matters heard together in the Supreme Court at the same time.

Telecom's shares plunged to a record low last month when the Government announced changes to the TSO regime. Brokers estimated that Vodafone was better off and Telecom was worse off under the new regime.

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