MBIE arrangements for finalising remaining technical regulatory settings in the Telecommunications (New Regulatory Framework) Amendment Act, 2018 Presentation to the Commerce Commission Fibre Workshop, 10 December 2018

Outline of presentation Summary of the scope of the Act for fibre and pending subsequent regulatory development. Implications of the extension of the implementation date for the new regulatory framework enabled by the Act. Comment on the scope of remaining regulatory settings. Timeline for remaining regulatory development and consultation.

Scope of the Act – with pending regulations now enabled As workshop participants are aware, the Act will institute a new regulatory framework for fixed-line services. The Act provides for: the regulation of wholesale fibre services using the regulatory framework similar to Part 4 of the Commerce Act, with similar precedence, but some tailored rules and settings, relevant to fibre communications networks (that will be established through Commission input methodologies.) retention of copper regulation where no fibre alternatives are available (defined through the assessment of ‘fibre specified areas’.) removal copper regulation where consumers have a choice to move to regulated fibre. consumer safeguards to ensure minimal disruption when copper services are withdrawn. While many of the components of the legislation are presented directly in the Act there a number of fibre regulatory settings that require further specification through regulation. These include: The persons and services subject to price quality regulation and information disclosure regulation (Section 226 of the Act, refers) Anchor services (Section 227 of the Act, refers) The Direct Fibre Access Service (228 of the Act refers) Unbundled Fibre Services (Section 229 of the Act refers) Specified points of interconnection (Section 231 of the Act refers, and gives the Commerce Commission the power to define and notify these points of interconnection.)

Extension of implementation to 2022 The Act includes transitional measures for the Commerce Commission to seek extension of the implementation date for the new regulatory framework by up to 24 months, upon request. This has been requested and an extension has been granted by the Minister. With this extension granted measures in the Bill will roll over commercial UFB contracts with the Crown until the new implementation date (now confirmed for 1 January 2022). This includes the monitoring obligation for these existing contracts, so the role of CIP will be retained throughout this transitional period 2020 - 2022. A summary of revised timing implications is present in the diagram on the next slide.

Diagram: Summary of transition to the new fixed line regulatory framework Pre-2022 Post-2022 Fibre Copper By 2025, Commerce Commission must review copper regulation and can recommend changes to the Minister After 2025, Commerce Commission able to review regulation and recommend changes to the Minister Local Fibre Companies – information disclosure only Chorus – information disclosure & price-quality regulation Inside specified fibre areas – copper will be deregulated and no longer subject to Telecommunications Service Obligations Chorus can withdraw copper subject to consumer protection requirements (a copper withdrawal code) being in place Outside specified fibre areas – copper remains regulated & the Telecommunications Service Obligations apply Price of copper services set at 2019 levels, with CPI adjustments from 2020 onwards. UFB contracts govern UFB wholesale pricing Applies to Chorus & Local Fibre Companies (Enable Networks, Ultrafast Fibre & Northpower Fibre) Copper regulated under Telecommunications Act 2001 Applies to Chorus 1 January 2022

Comment on scope of remaining regulatory settings The scope of the pending regulations will reflect the existing policy intent. The purpose, basis and general principles that will drive our development of these regulations, are as follows: Purpose: The purpose of the regulations will be to provide continuity and certainty in the transition between the fibre contractual conditions in place today and the new fibre regulatory framework. Basis for regulations: The initial set of regulations for the first regulatory period will based on the most recently concluded agreements between CIP and LFCs on fibre services available at the time of drafting, with opportunity to reference updates. General principles: The service description and conditions in the fibre regulations that will apply at the start of the first regulatory period and will not be materially different from those in the last version of contracts between CIP and LFCs. Any differences will based on improvements, developments and changes in technology, processes, practices, standards, architectures, interfaces and methodologies that can improve productivity, customer service or reduce costs.

Comment on scope of remaining regulatory settings (cont) 1. Persons and services to be regulated This regulation will specify those entities and services subject to price quality and information disclosure. The schedule is likely to take the form of the table below. Schedule of persons and services subject to price quality regulation and / or information disclosure regulation Person Service Type of regulation   Chorus New Zealand Limited Ultrafast Fibre Limited Enable Networks Limited Northpower Fibre

Comment on scope of remaining regulatory settings (cont) 2. Anchor Services An Anchor Service will be specified, with a technical description of the service, prescribed period, prescribed maximum price and relevant conditions and terms. This prescribed service will be able to be reviewed by the Commission, closer to implementation, with potential refinement or amendment. But in the interest of certainty, an intended service description for an Anchor Service will be available for gazetting well in advance of the implementation date. MBIE is (and will be) in discussions with Chorus, LFCs and CIP to establish the technical specification for the regulated service, to inform development. An indicative schedule outlining what the service is likely to look like is provided in a table in the slide that follows.

Comment on scope of remaining regulatory settings (cont) 2. Anchor Services (indicative specification) Anchor Service Specification – a 100/20 Mpbs broadband service   Technical specification A broadband service that provides 100 Mbps of downstream internet traffic and 20 Mbps of upstream internet traffic between the ENNI port and the ONT port. Prescribed period The first regulatory period from 2022-2025 Prescribed maximum price (NZ$) per month $XY per month subject to an annual CPI adjustment on 1 January in each year, for the first regulatory period . Conditions 1.1 The service must provide 2.5 Mbps symmetrical committed information rate traffic 1.2 The service must comply with the standards set out in the TCF UFB Ethernet Access Service Description 1.3 The access seeker must be able to connect to the ENNI port at one of the specified points of interconnection 1.4 The service must comply with the following traffic quality service levels, which apply to all ethernet traffic, with additional delay allowances made for backhaul routes where the access node is in a different town to the specified point of interconnection: 1.4.1… [Further terms and conditions to be included and annexed…]

Comment on scope of remaining regulatory settings (cont) 3. Direct Fibre Access Services (DFAS) DFAS regulations will specify this service, with a technical description of the service, prescribed period, prescribed maximum price and relevant conditions and terms. Conditions will be derived from the existing contractual services in UFB contracts refined to meet the stipulations in the Act. The Act focuses DFAS on the point to point aspects of the existing DFAS service. The regulated service description will reflect this. We intend to consult directly with LFCs, Chorus and RSPs on the technical specification of the DFAS service that will be developed, so that the service description meets the intent of the Act. Unbundled Fibre Services The future regulatory specification of unbundled fibre services will not occur in the first regulatory period. So the development of this regulatory setting will occur from the second regulatory period, likely to commence from 2025. The opportunity to apply price quality regulation to an Unbundled Fibre Service should not to be confused with the commercial negotiations on fibre unbundled service arrangements that are enabled by deed, and are likely to occur in lead up to 2020, but may inform a future approach to price regulated unbundling.

Comment on scope of remaining regulatory settings (cont) 5. Specified points of interconnection Specified points of interconnection will be determined by the Commission and published as a notice. This will be applicable to Chorus and LFCs. These points of interconnection (POIs) will be based on existing UFB and UFB extension descriptions, for the first regulatory period. There are approximately 40 specified points of interconnection currently across New Zealand. The regulations will identify and prescribe particular points of fibre network architecture that serve fibre-end user premises.

Timeline for remaining regulatory development and consultation Deliverables and intended timing are outlined in the table below MBIE has already commenced engagement with Chorus and RSPs on the treatment and development of terms and conditions for future regulated services. The indicative timeline1 for finalising these remaining regulatory settings is as follows: 1. The timeline is indicative, dependent upon Ministerial approval and House time. Project component Deliverable End Date Review and tailoring of relevant UFB and legislative specifications for inclusion Preparation of advice Dec 2018 / Jan 2019 Government drafting of regulations Government drafting of relevant regulations and schedules Feb / March 2019 Consultation draft preparation Consultation document and draft regulations available April 2019 Public consultation Receipt of submissions and finalisation of regulations May /June 2019