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Telecommunications Act 2001

Telecommunications service obligations - TSO charges payable by the Crown - Annual procedure for determining TSO charges payable by the Crown

94E: Considerations for determining net cost

You could also call this:

"How to work out the real cost of providing phone and internet services to people who need them"

Illustration for Telecommunications Act 2001

When you calculate the net cost, you need to think about a few things. You have to consider the money made from providing phone and internet services to people who cannot afford them, minus the cost of providing those services. You also have to think about making a fair profit from the money invested in providing those services.

When the Commission calculates the net cost, they can choose not to include profits from new services that require a lot of investment. They must not include losses from services that are not required by the TSO instrument. They have to consider the purpose set out in section 18.

The TSO provider must follow the Commission's rules when calculating the net cost. You need to know what "established telecommunications services" and "new telecommunications services" mean to understand this. "Established telecommunications services" are services that are not new, and "new telecommunications services" are services that started in New Zealand within the last 5 years.

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94D: Calculations of net cost and auditor's report must be given to Commission, or

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94EA: Calculations of net revenue and auditor's report must be given to Commission, or

"Telecommunications companies must report their income and have it checked by an auditor to ensure accuracy."

Part 3Telecommunications service obligations
TSO charges payable by the Crown: Annual procedure for determining TSO charges payable by the Crown

94EConsiderations for determining net cost

  1. In calculating the net cost under section 94D and calculating the net cost for the purposes of a draft TSO cost calculation determination under section 94F and a final TSO cost calculation determination under section 94J, the following must be taken into account:

  2. in the case of an instrument that is declared to be a TSO instrument under section 70, the range of direct and indirect revenues and associated benefits derived from providing telecommunications services to commercially non-viable end-users, less the costs of providing those services to those end-users:
    1. in the case of a deemed TSO instrument, the range of direct and indirect revenues and associated benefits derived from providing telecommunications services to all end-users connected to existing residential lines, less the costs of providing those services to those end-users:
      1. the provision of a reasonable return on the incremental capital employed in providing those services to end-users.

        1. Subsection (1) is subject to subsections (3) and (4).

        2. In calculating the net cost for the purposes of a draft TSO cost calculation determination under section 94F and a final TSO cost calculation determination under section 94J, the Commission—

        3. may choose not to include profits from any new telecommunications services that involve significant capital investment and that offer capabilities not available from established telecommunications services; and
          1. must not include any losses from telecommunications services other than services that the TSO instrument requires the TSO provider to provide; and
            1. must consider the purpose set out in section 18.

              1. In calculating the net cost under section 94D, the TSO provider must comply with any requirements of the Commission relating to the application of subsection (3)(a) to (c).

              2. In this section,—

                established telecommunications services means telecommunications services that are not new telecommunications services

                  new telecommunications services means telecommunications services that were first provided in New Zealand within 5 years before the start of the financial year to which the calculation of the net cost relates.

                  Notes
                  • Section 94E: inserted, on , by section 15 of the Telecommunications (TSO, Broadband, and Other Matters) Amendment Act 2011 (2011 No 27).