7 Oct 2009

TSO rural costs to rise for phone companies

12:22 pm on 7 October 2009

Telecommunications companies will have to pay an extra $10.7 million in Telecommunications Service Obligation (TSO) rural costs for the 2007-2008 financial year, because the credit crunch has forced up the cost of borrowing.

The Commerce Commission sets the final cost according to its model based on a weighted average cost of capital, which went up between the 2006-2007 and 2007-2008 financial year.

The fee is paid to Telecom for providing residential phone services to nearly 60,000 rural customers, who are deemed commercially non-viable.

Following a review, the Commission says the industry will have to now pay $72.1 million, up from $61.4 million the previous year.

The total cost is shared amongst companies according to market share: Telecom represents 67%. Vodafone is 26%.