Discussion Papers

Werner Neu

Interconnection of Telecommunications Networks in New Zealand
Nr. 142 / Januar 1995


For the successful liberalisation of telecommunications, the interconnection of networks is generally considered to be one of the most central issues. Although this was recognised by the government of New Zealand when in 1989 it decided to liberalise the country's telecommunications sector, its policy toward the issue has been quite different from that in other countries. The present paper describes and analyses the New Zealand experience with interconnection, carrying the analysis until about April 1994.

In New Zeland there is no regulatory authority controlling former state-owned and now privatised Telecom New Zealand. The incumbent as well as new network operators and service providers are only retroactively controlled by the rules of competition law. This is in contrast to what is true in most other countries where the sector normally is regulated either by an independent agency or by a central government ministry.

After changing in 1989 the relevant legislation, the New Zealand government in the same year completely opened the telecommunications sector to competition. In 1991, the new fixed-link competitor, Clear Communications, established itself as a provider of long-distance and international telephone service. It had negotiated an interconnection agreement with Telecom New Zealand allowing it to access its customers through the local lines that these have with the incumbent. The terms of the agreement appear to be more onerous than are accorded interconnecting operators in countries where there is direct regulatory involvement. There has also been a new market entrant for mobile telephony that obtained an interconnection agreement with broadly similar terms and conditions.

Clear has also entered the market for local telephone service. For more than three years, it has unsuccessfully attempted to negotiate a corresponding interconnection agreement with Telecom New Zealand. The case has been brought before the courts by Clear and, by the time of completion of this report, was before the highest court of the land awaiting a final ruling.
New market entrants have strong misgivings about the current regulatory situation. Like the government, however, they do not favour the establishment of an explicit regulatory agency on the model of those existing in other countries. They would prefer agressive application of existing competition law. Whether, given this background, the current regulatory approach to telecommunications in general and interconnection in particular will prove to be adequate from an overall societal point of view will still have to be shown in the future.

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