Interview: What’s on the new NZ telco commissioner’s agenda

Tristan Gilbertson was enjoying a morning cup of coffee in Jamaica when he read an online article that changed his life. The New Zealand telecommunications commissioner role was about to become vacant. He decided to apply.

Gilbertson had spent the previous six years in legal and regulatory roles at Digicel, the privately owned mobile telco spread across 32 markets in Asia-Pacific, Central America, and the Caribbean. For three of those years, he had been group general counsel, travelling constantly to Singapore, Jamaica, and Dublin (where Digicel owner Denis O’Brien lives). “We achieved some fantastic things in that time, so I was at a point where I was asking myself, ‘What next?’”

Gilbertson’s career: competitor, incumbent, competitor, regulator

In Gilbertson’s 27-year legal career, he has been on both sides of the telco divide: as part of the legal team when BellSouth came into New Zealand (its mobile network was later bought by Vodafone), taking on the role of general counsel at Telecom (now Chorus and Spark) during the Operational Separation years, and heading up the legal function at Digicel.

One role beckoned, he tells Computerworld New Zealand: the regulator.

“I can well remember as a young lawyer in the early nineties working on BellSouth’s entry into the mobile market just how difficult it was trying to get anything done. Battling with Telecom the incumbent without a proper regulatory backstop,” he says.

“Back then there was no regulator, no real backstop; it was tough going. But fast-forward 27 years later, if you’d said to me back then ‘Not only will you be the regulator, but you will be responsible for administering a world class regulatory regime’, I would never have believed you.”

In almost three decades, telecommunications in New Zealand has swung from light-handed regulation to a world-class regime that, Gilbertson notes, is now being copied by other jurisdictions.

“The new European regime that kicked off at the start of this year replicates key elements of our model. It embeds really strong incentives on incumbents to structurally separate … and the second thing is it builds in very strong incentives for cooperative approaches to network deployment, just like we did with Ultra Fast Broadband (UFB) and the Rural Broadband Initiative (RBI),” he says.

Gilbertson, who started as telecommunications commissioner in June 2020, has three items on his immediate agenda:

• establishing the new regime for regulating fibre networks
• ensuring a smooth transition from copper to fibre-based networks
• implementing Part 7 of the Telecommunications Amendment Act (2018) which specifically deals with consumer matters.

Following those, he might take on the US tech giants such as Google and Apple, but more on that later.

The new fibre regulatory regime

With the UFB and RBI almost complete, a new regulatory regime is required by law to be in place by 1 January 2021. The new regime will be designed to ensure that natural monopolies—primarily Chorus—are incentivised to invest while at the same time constrained in “its ability to extract excessive profits which would undermine the best interest of consumer.”

The old regulatory framework was a cost-based model in which the telecommunications section of the Commerce Commission (known as ComCom) had to come up with pricing based on a hypothetical efficient operator every three years. “Everybody hated it, and it more often than not generated litigation,” Gilberston says.

The new ‘building blocks regime’ is based on the regulatory approach adopted for the electricity, gas, and airports sectors. All the rules are made upfront, including a revenue cap for Chorus. The advantage is that a stable and predictable regulatory framework is established.

“There is enormous upfront work required in the setting of the methodology, which is why it’s taken us two years to get to this point—and another 18 months or so to get beyond this to the end point,” Gilbertson says.

“But it’s time well spent. Everybody in the industry is actively engaged in the process with the commission and, by the time we get to the end of it, we’ll have something that is completely different, a break from the past, a model that achieves its intended purposes.”

The key test will be if the commission is taken to court at the end of it. When the electricity regime came in, there were 56 grounds of appeal, and Gilbertson says it took a couple of years “for that process to complete itself, but by the time it did, it was done.”

When asked how the commission intends to treat unbundling under UFB, Gilbertson notes it had recently put out guidelines for operators and retail service providers (RSPs). “What we’ve done here is we’ve issued something that provides the opportunity for a circuit breaker. It’s a set of guidelines that provides more certainty and clarity around what nondiscrimination and equivalence actually mean. And so, there is an opportunity for both parties to come together in a way that wasn’t possible before, in an attempt to define a pathway forward. That’s what we’re expecting the parties to do, and we’ll see where that takes us.”

In short, he is looking to operators and RSPs to sort it out between themselves. “All other things being equal, we of course have a very strong preference for commercially negotiated outcomes over regulated outcomes,” he says.

Protecting consumer interests under new legislation

Under the new law, the commission has been given more specific powers to advocate more directly to protect consumer interests—as opposed to just ensuring the market is structured in way that promotes competition, which in turn leads to innovation and better pricing.

Gilbertson is charged with ensuring a smooth transition from copper-based to fibre-based network, and the commission has drafted two codes covering emergency 111 calling and copper withdrawal that are designed to protect consumer interests.

Gilbertson says they consulted widely among consumer groups on these codes and received “an enormous avalanche of feedback”. He says this will be useful in the third major programme of work, which is implementing the consumer matters section, Part 7, of the new legislation.

At the heart of this section is improving retail service quality (RSQ), and the commission’s opening salvo was to examine 80,000 mobile bills to determine if consumers are paying too much. “They [telcos] are great at letting people know when they need to be spending more but not so much when it comes to spending less.”

Gilbertson says the commission intends to send a “kick-off letter” to the industry next month, explaining the next phase in this programme. Part of this work is likely to include a review of how consumer concerns are dealt with. “We already know that dispute resolution is a pain point. One of the problems is if you are a consumer and have an issue with your provider and you are not able to sort that out with your provider, what do you do?” he says.

“Nobody knows what they are supposed to do. People can, and do, go in all sorts of directions. Some people get on the phone and call the commission, or they write to us. Some people write to the minister’s office. Some people go to Telecommunications Disputes Resolution service [run by the Telecommunications Forum]. Some people trot up the road to the Citizens Advice Bureau. It’s very fragmented, and so what we do about that is an important part of the equation.”

Gilbertson is also keen on the idea of a consumer data right (CDR) and says the commission will be submitting to a paper released by the Ministry of Business, Innovation and Employment. “The value of a CDR is that it deals really effectively with both transparency issues and inertia issues [consumers not being actively encouraged to seek better deals] at the same because without that you need to unpick each of those elements and deal with each of those two elements separately.”

Mobile networks and dealing with OTT providers

The commission’s latest review of the mobile market pointed to a reasonably competitive market at present. “All the key indicators of effective competition are there, it’s not perfect, not saying that,” Gilbertson says.

The advent of 5G technology is likely to shake things up as mobile network owners (MNOs) seek new revenue sources to justify the investment. “5G is probably going to be more expensive than 4G for the operator. It is a completely new generation for a start; it’s not an overlay technology. It requires deeper backhaul and it requires more cell sites, so there is more of an infill requirement, and then you’ve got the cost of the spectrum on top of that,” he says.

Gilbertson expects the economics of 5G will result in a more incremental, revenue-driven approach to its deployment than what occurred with the upgrade to 4G. “The costs are such that they could well alter the economics of mobile service provision. Not just in New Zealand but perhaps in other places as well. The costs create much stronger incentive for things like infrastructure sharing, perhaps network sharing as well in order to defray those costs,” he says.

“It also creates much greater incentives for the use of capacity. We could see for example, operators not just looking to cooperate with each other in terms of spectrum sharing, but also engaging more with MVNOs [mobile virtual network owners] as a means of soaking up that capacity and generate wholesale level revenue.”

As for the global tech giants that provide calling and messaging services over the top (OTT) of the networks, Gilbertson says it is worth investigating how much these services affect the business models of the domestic operators. “These guys [OTT companies] for the most part are based offshore. They have no local presence, they pay no local taxes, they’re not subject to regulatory rules and obligations that local operators are, they make no contributions to fees or levies including the TDL [Telecommunications Development Levy]. They ride over the top of the infrastructure that is built and paid for by others to provide services that earn revenue through advertising and those services generate enormous amounts of money that are siphoned offshore,” he says.

On his radar is a review of the TDL, which might be an opportunity to review the role of OTTs in the New Zealand telecommunications sector. But that won’t happen until the new fibre regime and consumer programmes are completed first. “I’m just posing the question, that it’s something I think we should look at. The interesting thing is when we looked at the mobile market last year, we flagged this issue but there were no conclusions, there was no deep dive on it. To me it was a placeholder for further work to be done,” he says.