Operational separation of Telecom approved

Published: 09.04.2008

On Monday, 31 March 2008, the Minister for Communications and Information Technology announced his approval of a Separation Plan for the operational separation of Telecom New Zealand into three separate business units.

“This is a highly significant step for the telecommunications market, and I’m pleased to announce the successful implementation of the operational separation today – 31 March 2008 or “Separation Day”,” said Hon David Cunliffe.

The operational separation of Telecom is one of several regulatory measures introduced since 2006 to increase competition and encourage investment in New Zealand's telecommunications sector, in order to improve the speed, pricing and availability of broadband services – a key driver of productivity and innovation in knowledge-based economies.

The aim of operational separation is to increase the transparency of Telecom's business operations, and remove or limit the incentives and ability of Telecom to engage in discriminatory behaviours that lessen, damage or exclude competition in downstream markets.

The main requirements of operational separation are:

establishment of a separately branded, stand-alone and arms-length fixed network business unit that will control all present and future access network assets, including fibre and fixed wireless access assets (Chorus was launched by Telecom on Separation Day)
establishment of an arms-length wholesale division that will provide access to key fixed network regulated services, including advanced bitstream services, to all service providers (including Telecom)
establishment of one or more arms-length business units that provide one or more other functions (for example, retail services)
formal oversight of Telecom's implementation of the separation plan and internal compliance by an Independent Oversight Group (IOG) backed up by Commerce Commission enforcement – the IOG will be established by 1 July 2008, and
transparency and equivalence of supply of relevant services and access to Telecom's network, including a requirement that any future commercial fibre-to-the-premises and access to the next generation network core be provided on a non-discriminatory basis.

In accordance with the Telecommunications Act, the Commerce Commission will monitor and enforce the Separation Plan.

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