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Regulatory Alert – March 2018

Home Insights Regulatory Alert – March 2018

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Contributed by: Craig Shrive, Troy Pilkington, Hamish Saunders and Felicity Ellis

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Published on: March 28, 2018


Mobile Market Study

Yesterday the Commerce Commission (Commission) confirmed the scope of its study into mobile telecommunications markets (Study). This follows submissions on the Terms of Reference (TOR) for the Study, which were published in October 2017.

The Commission is undertaking the Study under section 9A of the Telecommunications Act, which requires the Commission to monitor competition in, and development and performance of, telecommunications markets in New Zealand. The Commission's stated purpose of the Study is to better understand trends and developments in telecommunications markets, identify potential barriers to competition that may impact consumers and, consequently, consider whether any regulatory measures may be appropriate.  

The Study will cover:

  • the current structure and competitiveness of mobile markets, including:
    • key events that have occurred in the industry;
    • associated consumer outcomes; and
    • the existence of any competition issues;
  • upcoming key events and the impact on competition and consumer outcomes (eg 5G deployment and spectrum allocation); and
  • potential obstacles to market development such as:
    • barriers to entry;
    • barriers to expansion;
    • current or potential anti-competitive behaviour; and
    • other factors affecting consumers' ability to benefit from competition.

The confirmed scope is materially different to the TOR outline, which focussed on evolving consumer preferences and how mobile providers are responding to them and technology shifts, and possible future trends. The confirmed broader scope will include an analysis of historical events and their contribution to the current structure of the market. Interestingly, seeking to understand consumer preferences no longer expressly features in the scope, but presumably will still inform the Commission's analysis.

The Commission expects to publish an issues paper mid-2019 which will expand on selected aspects of the scope, to seek feedback from interested parties. The Commission has also noted that it will be working with the Ministry of Business Innovation and Employment to incorporate the results from its consultation on 5G spectrum allocation (available here). MBIE has asked a number of questions about availability and allocation of spectrum for 5G, and had indicated a preference for allocation that will support 5G infrastructure competition.

Further information can be found here.

Electricity Price Review

The Government is undertaking a review of electricity prices to investigate whether the electricity market is delivering a fair and equitable price to end-consumers (Review). Yesterday, Dr Megan Woods, Minister of Energy, announced the Terms of Reference for the Review. They open by noting an increase of 50% in real electricity prices for residential customers since 2000, compared to relatively flat prices faced by commercial and industrial customers. The Government has also identified a need to adjust the regulatory framework to facilitate benefits in the development of technology. 

The Review will seek to identify whether:

  • suppliers of electricity services have the ability to extract excessive profits over time;
  • fair prices are equally accessible to all consumers;
  • there are currently, or is potential for, barriers to entry to limit competition across the supply chain; and
  • the costs of providing electricity services should be socialised across classes of consumers.

The Review will consider the entire supply chain (generation, transmission, distribution, and retail) to determine fairness and efficiency, but also take into account broader issues of security, reliability, and environmental sustainability. 

Technical regulatory detail (such as WACC determinations and the trading of financial transmission rights) has been expressly excluded from the scope of the Review. Any suggested changes to the input methodologies will be approached with considerable caution, given the extensive amount of consultation and litigation previously undertaken. 

The Expert Advisory Group (EAG), once its membership is confirmed, will determine its own process, but is expected to involve wide engagement on issues and draft findings. The Review may also be structured in stages, with initial stages focussing on determining facts and building evidence (April to June/July). The high level timeline also anticipates public engagement on issues in July/August, engagement on options in December to February, and a final report to the Minister and Cabinet decisions in April/May 2019. 

Further background on the Review, including the full Terms of Reference, is available here.

Commerce Amendment Bill

The Commerce and Consumer Affairs Minister, Hon Kris Faafoi, has also tabled the new Commerce Amendment Bill (Bill) today which includes changes to the regulatory regime for airports.

The amendments are based on the two policy reviews carried out by MBIE as part of phase one of the targeted review of the Commerce Act and MBIE's assessment of the effectiveness of the regulatory regime for major airports (Auckland, Wellington and Christchurch) in response to the Commission's section 56G reports in 2013 and 2014.

The Bill modifies the regulatory regime to include a new streamlined inquiry process that can be triggered at the Commission's own initiative or by the direction of the Minister. The Bill empowers the Commission as a result of the inquiry to make a recommendation as to whether other types of regulation (negotiate / arbitration, price-quality etc) should be imposed on airports in addition to information disclosure. The Minister must then consider the Commission's recommendation and decide whether further regulation is to be imposed by Order in Council.

The Bill also clarifies that the Commission can analyse how effective information disclosure is at meeting the purpose of regulation in its summary and analysis of regulated suppliers.

The Government's press release on the bill is here and a copy of the bill can be found here.

This publication is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.

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