Telco commissioner Tristan Gilbertson has two big tasks and a 'paradox' to fix

Friday, 16 April 2021

Telecommunications commissioner Tristan Gilbertson will need to decide this year whether Chorus should be forced to cut, or allowed to raise the wholesale price of ultrafast broadband.

He also looks set to release guidelines to ensure internet providers are upfront about the options facing the 30 per cent or so of consumers in UFB areas who could start to be forced off the copper phone network from September.

And he has a mystery to solve; why complaints about telcos continue to rise, despite his assessment it is in their interests to behave well and that they are not actually trying to do the dirty on customers.

After nearly a year in the job and despite the inevitable battle ahead over broadband pricing, the former industry lawyer paints quite a glowing picture of the industry.

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“We are a world leader now in terms of the deployment, uptake and the affordability of next-generation networks – fixed and mobile – and we are a leader in terms of industry structure and regulatory design.

“We have proved just how well a structurally-separated wholesale-only access model, combined with UFB as a co-investment vehicle for driving change, can be,” he says.

It is, he suggests, a sea change from the past.

In the early 1990s, Gilbertson worked for Bell South – later acquired by Vodafone – when it was planning its entry into the New Zealand mobile market.

“That was back in the ‘bad old days’ when we were adhering very dogmatically to a policy of light-handed regulation.

“I remember how bad it was battling against the incumbent Telecom trying to get anything done without access to any of the regulatory tools that were available in other countries. That was a tough time.”

Later, after a spell with Vodafone in Japan, brought about thanks to his decision to learn Japanese and spend a high-school year in the country when aged 17, Gilbertson ended up back in New Zealand as Telecom’s general counsel during the tumultuous period of its split between 2008 and 2012.

By then the pendulum had swung to the opposite extreme in New Zealand and “literally everything in the regulatory tool kit fell on Telecom’s head,” he recalls.

Gilbertson, 52, knows from those experiences that he won’t be able to please everyone this year.

Next month, the Commerce Commission will release a draft decision on the price (currently $47.15 a month) that Chorus will be allowed to charge internet providers for its standard 100 megabit UFB service from 2022 onwards, under a new regulatory regime.

The decision promises to be an echo of the telco battles of old.

“Chorus wants a bigger number; the retailer providers want a smaller number,” Gilbertson notes.

Technology Users Association (Tuanz) chief executive Craig Young hopes the commission will be able to announce the wholesale price of UFB will come down – though by how much he won’t say.

“One of the things that concerns me is the ‘digital divide’. Is that a low enough price get people on to being connected? It probably isn’t,” Young says.

Chorus spokeswoman Holly Cushen responds that “as a consumer representative body, Tuanz’s desire for a lower-priced anchor service is understandable”.

“However, broadband prices in New Zealand are already competitive,” she says.

Already Spark is at loggerheads with Chorus, accusing it essentially of overestimating and loading too many corporate and other unrelated costs into the price calculation for the regulated service.

The fact Chorus has been offering incentives of up to $800 to encourage internet providers to convert customers to UFB from rival networks such as fixed-wireless, might seem to suggest there is fat in Chorus’ current pricing.

And while it’s a crude metric the commission could not consider, divide Chorus’ market value on the NZX by the 870 staff it employs and the company’s value works out at a chipper $3.3 million per employee.

But as Gilbertson notes, Chorus is reasonably entitled to “a normal return on its investment”.

Cushen says pricing for fibre also has to balance “Chorus continuing to invest to increase connections, promote uptake and develop new products to meet future customer demands”.

The inputs the commission is having to consider are so technical, that Young argues the outcome may more resemble a judgment call that people will have to chose whether to trust or not.

And Gilbertson of course won’t be drawn on the likely outcome.

But he acknowledges the review is a massive undertaking “involving some of the most contentious issues in economic regulation”, taking comfort from the fact nothing has been subject to legal appeals so far.

While the price/quality review of UFB may represent more risk than upside to Chorus, it may get cheer from another of the commission’s initiatives.

For several years, Chorus has sparred with Spark in particular over its marketing of its fixed-wireless broadband service as an alternative to fixed-line technology.

Now it appears Gilbertson is about to lay down some firm ground rules for the whole industry.

Chorus will be allowed to start shutting down its copper network in areas where UFB is high from September, and Gilbertson is keen to avoid a feeding frenzy for uninformed, displaced customers during that “once in a generation shift”.

“We are becoming increasing concerned that customers facing decisions may be getting incomplete or inaccurate information that distorts their purchasing decisions,” he says.

“What we don’t want to hear is customers being told their copper is being ‘taken away’ when that is not happening, or not happening yet.”

Nor does it want to hear that customers are being told they have to switch to fixed-wireless, he says.

“And we certainly don’t want to hear that customers are being led to believe that fixed-wireless is a substitute for fibre because it is not.”

The likely upshot appears to be a set of guidelines, agreed with internet providers if possible but imposed on them if not, setting out what they should do and what they can’t do in their marketing.

On the broader question of service quality in the industry, Gilbertson sees plenty of opportunity for “win-wins”.

He says it is a paradox that despite “fantastic progress” in telecommunications and the fact “nobody wants an unhappy customer”, the number of consumer complaints to the commission has doubled over the past five years.

Some of that might be explained by more complex technologies playing a bigger part in more people’s lives, but even allowing for that, the overall picture is not positive, he says.

The industry accepted it needed to up its game, he says.

And since 2018, with the latest tweak to the Telecommunications Act, the commission now had the tools to “make a difference”, he says.

“There is a real opportunity for us to work together to unpack some complex issues and frame up some practical solutions.”

The commission began consulting in October with consumers to get to the bottom of what was going on, Gilbertson says.

“The reality is that there is not an easy answer here. It is a combination of different factors and the drivers are probably different for individual operators.”

But an overhaul of the Telecommunications Disputes Resolution Scheme looks on the cards, as do further steps to ensure consumers have more solid information in what has traditionally been a marketing-intensive industry.

“A competitive market is one where we have informed consumers making informed choices.”

Early fruits are that mobile users will get an annual summary and 12 months usage and spending information in “an easy to understand form” from their telco with a prompt to check they are on the best plan, and price comparison tools that the commission aims to stand up by the end of the year.

“That is going to make a difference for consumers,” Gilbertson promises.