Telecom had promised better rural services

Telecom made a series of promises to improve rural telecommunications services during last minute negotiations on the operational separation of the company.

In a letter faxed to Communications Minister David Cunliffe on Sunday, chief executive Paul Reynolds promised Telecom would better account for subsidies paid to it by other telcos under the Telecommunications Services Obligation and would spend all the money it received under the arrangement in rural areas.

Dr Reynolds also promised Telecom would convene three workshops next month to "develop options to extend broadband to rural and remote regions'' through the public-private partnerships, and would do its best to wrap up negotiations on a revised TSO by the end of June.

Councils will be invited to the workshops in May, which will address how best to improve broadband services for the 20 per cent of New Zealanders who live in settlements with fewer than 500 phones lines and who are not set to benefit from Telecom's $1.4 billion cabinetisation programme which will see fibre optic cables and fast broadband rolled out to all larger towns.

"I want to be far more transparent going forward about what the TSO means for our rural customers, and how we apply the compensation we receive under the TSO in our rural capital expenditure planning,'' he said.

"We hope to be able to report back quickly to those interested parties with more detail on PPP models we think will work for Telecom and potential partners, so that we can start working with interested parties on real proposals,'' Dr Reynolds said. "We will at the same time reaffirm our interest in exploring cost sharing options with other industry players.''

Mr Cunliffe accepted Telecom's undertakings on operational separation the morning after receiving the fax, following discussions with officials that are understood to have gone on into the night.  It is understood it was Dr Reynolds' concessions on the TSO cleared the way for a deal.

Speaking at the launch of Telecom's network access company, Chorus, on Monday evening, Mr Cunliffe thanked Dr Reynolds for the commitments on the TSO.

The negotiations over operational separation had been "firm at times and always honest, but always honourable'', he said.

Dr Reynolds said the discussions had been tough but fair, and that operational separation was "good for companies of the scale and size'' of Telecom.

With the management teams and chief executives of Telecom's three business units "ruthlessly focused on their customers, their markets and their issues we are going to get more agility, better performance and more innovation'', he said.

Under the TSO, Telecom is obliged to provide phone lines and free local calls to customers and restrict rises in residential line rental charges to the rate of inflation.

Other telcos must pay their share of the cost, estimated in 2005-2006 at $78.5 million, to Telecom.

The Government is considering making Telecom's obligation to serve customers contestable, so other telcos could pick up the obligations along with the subsidies. It has also consulted on whether the TSO should be expanded to include a right to a basic broadband service.

Former Telecom chief executive Theresa Gattung offered last year to include a basic 256 kilobit broadband connection in 2006 in a failed bid to stave off regulation.

The Telecommunications Carriers' Forum, an industry body, yesterday recommended against including broadband in the TSO, saying it was not "an appropriate mechanism" to address the rural broadband issue.