Five submissions urge NZ regulator to reject One NZ-2degrees network joint venture

Five submissions to New Zealand's Commerce Commission oppose the planned One NZ and 2degrees radio access network joint venture, known as Ranco, arguing it could undo past telecommunications reforms and harm consumers. The Commission expects to decide by 23 November.

Under the proposal, both companies would place their radio access network assets in a 50/50 joint venture that sells access back to each of them, according to RNZ as cited by B2B News. Each would keep its own spectrum, core network and retail pricing. The Commission is testing whether the venture could raise prices, cut quality or make tacit coordination between the partners more likely.

The submitters raise four concerns. The first is the move from three independently run radio networks to two, which former Tuanz chief executive Ernie Newman and former chair Judy Speight say would create a duopoly. Economic reports from Compass Lexecon and HoustonKemp, both commissioned by law firm Chapman Tripp, argue that removing competition between the radio networks would reduce the operators' ability to differentiate on quality. The second concern is weaker incentives to invest, because Compass Lexecon says any Ranco investment could only win customers from Spark. Third, HoustonKemp and Compass Lexecon say the expected savings are largely fixed-cost savings more likely to reward shareholders than cut bills. They also warn that usage-based charging of the owners could create a common wholesale price floor and make price coordination easier. The fourth concern is systemic risk, since shared infrastructure leaves consumers with fewer backup options during failures or severe weather.

Ispanz, which represents smaller players, says relying on mobile virtual network operators to protect competition is "fatuous". It says New Zealand's unregulated MVNO segment accounts for around three per cent of connections, against around 20 per cent across the OECD, and lacks the scale to constrain pricing without open access mandates. Ispanz wants MVNO regulation in place before any further consolidation.

Monopoly Watch NZ, led by 2degrees founder Tex Edwards, is the only third-party submitter backing the venture. It argues that the cost of continually upgrading radio equipment is a major disadvantage for smaller operators, and that Ranco would cut the capital 2degrees must spend. It says the Commission should approve the deal provided One NZ and 2degrees keep strict independence over spectrum, core networks and retail strategies.

One NZ chief executive Nick Judd said sharing radio access equipment is common overseas and allows more efficient investment. Judd said, "This proposal would deliver real benefits for customers by enabling us to deliver better connectivity." 2degrees chief executive Mark Callander promised "better coverage, greater capacity, stronger resilience and faster access to new technology". Spark chief executive Jolie Hodson did not oppose the move, saying only that going from three networks to two needs careful consideration.

The Post noted that Chapman Tripp has a history of major legal work for Spark and said it had asked the firm whether it is acting for Spark on the application. Because 2degrees is majority owned by Macquarie Asset Management and Aware Super, B2B News reports the deal also needs Overseas Investment Office sign-off.