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The Government has been accused of an "embarrassing back-down" after ditching a controversial regulatory holiday for ultra-fast broadband (UFB) providers.
The proposal would have given fibre companies an 8-1/2-year regulatory holiday during which the Commerce Commission would not have had any oversight of prices and services.
The Government today announced that the provision would be replaced with contractual measures that would kick in if the commission regulated prices lower than those contracted.
The move comes after negotiations with the Maori Party, which pushed for the commission to be able to investigate prices.
Communications and IT Minister Steven Joyce said he had listened to industry concerns and the solution would give confidence to providers and consumers.
The Government would back the prices negotiated by Crown Fibre Holdings but if the commission believed prices should go lower during the UFB build period, then the Crown would wear the risk rather than consumers, he said.
Telecommunications groups have welcomed the move, but Labour has called it a compromise solution that was worse than the original proposal.
Labour MP Clare Curran said Mr Joyce had been forced into a "hugely embarrassing back-down" and the scheme was now in tatters.
"Anything that can make a piece of legislation better is a good thing. Our concern is that it's not making it better -- it's rushed policy, it's been made on the hoof and it's a huge embarrassment for him."
Ms Curran said the change took away the secrecy of price-setting and made it more transparent, but shifted risk to the Government.
"It's actually making the thing worse than it was in the first place. He's allowing the Commerce Commission back in but he's transferring all the risk to the Crown, which means that he's providing greater certainty for a private contractor and pushing risk back on to the taxpayer."
Mr Joyce said the contractual mechanism would achieve the same outcome for investors and would also allay consumers' concerns.
It was unlikely that the commission would have to step in, he said.
Maori Party telecommunications spokeswoman Rahui Katene said she was pleased the Government had listened to its calls for consumers not be hard done-by.
"We listened to a number of consumers who told us that the industry building the infrastructure must be held accountable, that families must be protected and that they don't want to see anti-competitive pricing that takes too much money from their pockets."
Green Party technology spokesman Gareth Hughes said the move was a win for New Zealanders but could end up costing taxpayers.
"This is a major back-flip for Steven Joyce. It continues his track-record of poor process and haste on the bill."
InternetNZ chief executive Vikram Kumar welcomed the dumping of the regulatory holiday.
"The mechanism proposed looks like a superior approach ... It does not require a major re-write of the Telecommunications Act, and it can be implemented quickly."
Telecommunications Users Association chief executive Paul Brislen was also happy.
"We, the consumers, get full Commerce Commission oversight of the new regime to make sure we're getting the best bang for our buck."