Project no. 13.02/13167

Public version

Draft Notification of Potential Liability for the Development Levy 2012

Notice of persons potentially liable to contribute to the Telecommunications Development Levy made under Part 3 of the Telecommunications Act 2001.

The Commission:

Dr Ross Patterson

Anita Mazzoleni

Dr Stephen Gale

Pat Duignan

Date of Decision: 19 April 2012

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List of defined terms and abbreviations

Act means the Telecommunications Act 2001

Amendment Act means the Telecommunications (TSO, Broadband, and Other Matters) Amendment Act 2011

Chorus means Chorus Ltd and Chorus Limited

LRTS means Local Residential Service minimum is defined in section 80 of the Act as meaning $10 million of telecommunications gross revenue (as may be determined by any specifications revenue set by the Commission) that a liable person receives during a financial year for supplying either a telecommunications services by means of its PTN, and/or telecommunications services by means that rely primarily on the existence of its PTN or any other PTN

TDL means Telecommunications Development Levy

Telecom means Telecom Corporation of New Zealand Limited and Telecom New Zealand Limited

TRS means Telecommunications Relay Service for hearing impaired

TSO means Telecommunications Service Obligations in relation to a TSO instrument

TSO deed For LRTS means the deed contracts between Telecom, Chorus and the Crown, and for the TRS means the contract between the Crown and Sprint International New Zealand Limited (“Sprint”)

TSO provider means Telecommunications service obligation provider (Telecom and Chorus for LRTS and Sprint for TRS)

Year A means the financial year that is the subject of the liability allocation determination

Year prior to Year A means the financial year preceding the year that is the subject of the liability allocation determination

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Executive Summary 1. This notification sets out the Commission’s preliminary decisions on those persons potentially liable for monetary contributions to the telecommunications development levy. Potentially liable persons will be required to submit financial information to the Commission to determine whether they met the $10 million minimum annual telecommunications revenue threshold for liability for the TDL for the period 1 July 2010 – 30 June 2011. The Commission will issue a notification following consultation with potentially liable persons.

2. The Commission seeks submissions from parties on the Commission’s definition of liable persons, and list of liable persons attached to this draft notification.

3. The Act defines a ‘liable person’ as “a person who provides a telecommunications service in New Zealand by means of some component of a PTN that is operated by the person”.1

4. Therefore, in order to be a liable person, a service provider must –

a. provide a telecommunications service, which may include the transmission of voice, data, SMS, or any other content, but excluding (the transmission of programmes for reception by the public)

b. provide the telecommunications service in New Zealand

c. operate a component of the PTN over which the telecommunications service is provided

d. operate a component of a PTN that falls within the public side of the network demarcation point – the component must be operated by the service provider, not a third party2

e. operate a network that is publicly available i.e., not limited to a proprietary use e.g., Police systems.3

5. A telecommunications service includes any conveyance by electronic means, regardless of the content of that conveyance, other than broadcasting. Broadcasting consists of the conveyance of programmes for reception by the public, but expressly excludes programmes conveyed on the demand of a person for reception only by that person (such as certain video-on-demand services).

6. Therefore, retail and wholesale voice and broadband service providers, mobile voice operators, and ISPs excluding pure resellers are liable persons (this group includes those previously captured by the TSO, plus VoIP operators and ISPs). In addition,

1 Section 5 of the Act. 2 In some circumstances, a party may exercise such control over the performance of this function by another that they may be considered to “operate” the switching functionality through the other party. 3 Any retail service provider or other person must be able to access the network (subject to certain generic conditions precedent).

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wholesale service providers, such as local access network or backhaul service providers, are liable persons. Pure resellers are not liable persons as they do not operate a component of the PTN.

7. Providers of content over the do not, merely by allowing end-users to access their content and information (whether via on-premises servers or in a third-party hosting facility or cache), operate a component of a PTN. (They fail element 4(c).) Only if they operate a component of the PTN over which the content is conveyed are they liable.

8. is the conveyance between devices; network means a system comprising interconnected links to permit telecommunications. The devices at the supplier end (a server or cable) and the devices at the receiving end (such as a telephone or personal computer) are not a component of the network.

9. Applying these criteria, the indicative list of liable persons now excludes (on the basis that it does not operate a component of a telecommunications network) but includes local fibre companies, and Crown Fibre Holdings as a related party to the regional local fibre companies. The Commission remains of the view that Chorus is a liable person for the 2011/12 financial year, because it carried on business in the preceding year, albeit as an unincorporated person.

10. Following the review of submissions and cross-submissions on this notification, the Commission will issue a notice of potential liability to all persons who, based on information available to the Commission, meet the criteria for potential liability under section 81. Each potentially liable person will be required to provide information and financial statements for the period 1 July 2010 – 30 June 2011 in accordance with section 81(2) of the Act to determine whether they meet the minimum telecommunications revenue threshold for liable persons.

11. The Commission will prepare a draft information request for the purposes of prescribing qualified revenue for consultation in the next month. Following consultation with parties, the Commission will issue a notice for additional information to be used to calculate qualified revenue that liable persons will be required to produce for the Commission for the purposes of determining their TSO liability.

12. After that information is received, the Commission will issue its draft TDL liability determination in accordance with section 84 of the Act.

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Introduction 13. This draft notification provides the Commerce Commission’s preliminary decisions on identifying the service providers who are potentially ‘liable persons’ for the purposes of the Telecommunications Development Levy (TDL) for the 2011/12 financial year. These service providers will be required to provide the Commission with information to assist the Commission in determining whether they met the minimum telecommunications revenue threshold for the 2011/12 financial year, and to determine their qualified revenue. Liable persons meeting the minimum telecommunications revenue threshold, and trading in the 2010/11 financial year, will be required to contribute to the telecommunications development levy.

14. This draft notification does not cover the requirements for assessing an eligible liable person’s qualified revenue. All matters relating to qualified revenue will be dealt with at a later stage in the Commission’s process.

Background 15. The TDL was introduced by the Telecommunications (TSO, Broadband, and Other Matters) Amendment Act 2011 (Amendment Act). It replaces the Telecommunications Service Obligations (TSO) liability allocation process, and streamlines the process for industry contributions to government-led improvements to New Zealand’s telecommunications infrastructure.

16. According to the explanatory notes at the beginning of the first draft of the Telecommunications (TSO, Broadband, and Other Matters) Bill explaining Part 1 (which covers the TDL and TSO amendments):

The Bill—

…

• streamlines the legislative funding mechanisms for TSO instruments by introducing a new Telecommunications Development Levy (the TDL), which will be collected from industry participants annually and be used for the payment of TSO-related compensation, non-urban telecommunications infrastructure development, and upgrades to the emergency services calling system.

17. In the first reading of the Telecommunications (TSO, Broadband, and Other Matters) Bill, Steven Joyce (Minister for Communications and Information Technology) summarised the relevant TDL changes as follows4:

The bill also implements the Government’s telecommunications service obligation reforms. …

The bill amends payment of compensation to a telecommunications service provider by requiring the Crown to pay compensation due to telecommunications service obligation providers as assessed by the Commission. That compensation is funded from a new levy called the telecommunications development levy. The annual amount to be collected for the telecommunications development levy is specified in the bill, and the money collected will

4 See Hansard Debates, Volume 669.

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first pay for any telecommunications service obligation charges, and then rural telecommunications infrastructure development and upgrades to the emergency-calling services. [Emphasis added]

18. The first TDL Liability Allocation Determination was completed for the 2010/11 financial year. The definition of liable person for that year was prescribed in the Amendment Act as being those persons who were liable for the 2009/10 TSO Cost Allocation Determination. From 2011/12 onwards, service providers are liable to contribute to the TDL if they meet the definition for “liable person” in section 5 of the Telecommunications Act 2001 (Act), traded in the preceding financial year, and met the minimum telecommunications revenue of $10 million, in accordance with section 81 of the Act.

19. On 2 February 2012 the Commission released a discussion document Determining the liability allocation for the Telecommunications Development Levy for 2011/12 and beyond (Discussion Document). The Commission asked 18 questions on a variety of TDL related issues including:

19.1 the Commission’s TDL obligations and formal processes, such as statutory timeframes and proposed processes for consultation and issuing a final determination

19.2 the key terms and concepts integral to the new system – including terms such as PTN, liable persons, and concepts such as the net-revenue approach, deductions and non-qualifying telecommunications revenue.

20. In the discussion document the Commission outlined a two-step process for determining TDL liability:

20.1 first, we would determine who the liable persons were in accordance with the Act

20.2 second, we would determine how to quantify their qualified revenue for the purposes of assessing liability to the TDL.

21. Submissions were invited on the Commission's Discussion Document decision by Wednesday 22 February 2012. Cross-submissions were due by Wednesday 29 February 2012.

22. The due date for submissions was extended to Wednesday 24 February and 2 March for cross-submissions as most submitters required extra time because they were at the Ultrafast Broadband conference in on the 22nd and 23rd of February.

23. Submissions were received from fourteen parties and a further 7 cross-submissions were also received. The Commission extended the time for cross-submissions to 7 March following a late submission from BayCity Communications (BCL). Only Telecom provided a cross-submission on the BCL submission.

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24. The Discussion Document, submissions and cross-submissions received from parties on the Discussion Document, are available on the Commission’s website at: http://www.comcom.govt.nz/telecommunications-development-levy/

Meaning of ‘liable person’ 25. The Act defines liable person, as “a person who provides a telecommunications service in New Zealand by means of some component of a PTN that is operated by the person”.5 Those who the Commission considers meet the definition of ‘liable person’ are referred throughout this draft notification as ‘potentially liable persons’.

26. In accordance with section 81 of the Act, a service provider that meets the definition of liable person is obligated to contribute to the TDL if it:

26.1 has been trading in the year prior to Year A; and

26.2 derived telecommunications revenue of $10 million or more from operating a component of their PTN or any other PTN during the year prior to Year A.

27. In the Discussion Document, therefore, the Commission noted that a liable person must satisfy the definition of liable person, and must meet the two requirements of section 81 of the Act. 6

28. This draft notification does not assess whether a potentially liable person derived telecommunications revenue of $10 million or more from operating a component of their PTN. This assessment will be carried out separately after consultation on this draft notification is complete.

Submissions 29. Submitting parties commented extensively on issues related to both defining and identifying liable persons. Most submissions analysed the specific elements of the definition of ‘liable person’. Various views on the meaning of these particular elements are summarised below, along with the Commission’s conclusions with respect to those views.

‘Person’ 30. The main issue raised in relation to the meaning of “person” was Chorus’ position that it was not a liable person for the 2011/12 financial year as it was not incorporated in the preceding (2010/11) financial year.

31. TelstraClear noted, in relation to Chorus’s potential liability, that a ‘person’ is defined in the Interpretation Act 1999 as a “corporation sole, a body corporate and an unincorporated body”. Incorporation, they argued, was not an exclusive marker of whether an entity is treated as a ‘person’ under New Zealand law.

5 Section 5 of the Act. 6 See also Commission’s Discussion Document, para. 30.

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32. As Chorus’ position on liability includes a discussion of whether it was trading in the preceding financial year (a separate requirement under section 81 of the Act for determining liability for the TDL), this issue is discussed in more detail beginning at paragraph 83 below.

33. In the Discussion Document, the Commission proposed that, where a liable person ceases trading during the preceding financial year or ceases to operate the telecommunications component of their business, the person should have no liability for the TDL in the current financial year (though they will continue to have liability in the year in which they ceased trading).

34. The Commission further proposed that it would apply section 79 of the Act if a liable person is acquired by another liable person, to ascertain how to determine whether the minimum telecommunications revenue threshold is met. If a liable person was purchased in the preceding year, then the merged entity would be liable for the current financial year. If the entities merged during the current financial year, they would be separately liable up until the merger date, and then the merged entity would be liable post-merger.

35. In accordance with these views and section 79 of the Act, a new entity formed from the merger of two liable persons would be liable.

36. Similarly, the Commission considers that a change in status (such as changing from an unincorporated to an incorporated person) does not alter the person’s liability.

‘Telecommunications service’ 37. The Commission received a number of submissions on the meaning of ‘telecommunications service’. The Act defines telecommunications service as “any goods, services, equipment, and facilities that enable or facilitate telecommunication”. ‘Telecommunication’, which is referred to in the definition of ‘telecommunications service’, is defined as–

(a) the conveyance by electromagnetic means from one device to another of any encrypted or non-encrypted, sign, signal, impulse, writing, image, sound, instruction, information or intelligence of any nature, whether for the information of any person using the device or not; and

(b) for the purposes of subpart 2 of Part 4, includes any conveyance that constitutes broadcasting; but

(c) for all other purposes, does not include the conveyance that constitutes broadcasting.

38. Broadcasting is defined in the Broadcasting Act 1989 as–

Any transmission of programmes, whether or not encrypted, by waves or other means of telecommunication for reception by the public by means of broadcasting receiving apparatus but does not include any such transmission of programmes–

(a) Made on the demand of a particular person for reception only by that person; or

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(b) Made solely for performance or display in a public place

39. ‘Programmes’ is defined in the Broadcasting Act as any “sounds or images, or a combination of sounds and visual images” intended to enlighten, entertain, inform, or promotes products, services, or the interests of a person.7

40. Broadcasting is, therefore, the telecommunication of a specific kind of content (programmes) to a specific audience – the public. By exclusion, ‘telecommunication’ as used in the Act does not include the conveyance of programmes to the public, and a telecommunication service does not include any goods or services that enable or facilitate conveyance of programmes to the public.

41. TelstraClear submitted that there is a distinction between the carriage or conveyance of content and the content itself.8 TelstraClear said that its position was supported by Australian authority9 which draws a distinction between the means of conveyance and the content. TelstraClear submitted the definition of ‘carriage service’, a defined term in Australia which excludes the conveyance content, was broadly analogous to the definition of ‘telecommunications service’ and ‘telecommunications’ in the Act, if combined together.

42. Sky submitted that it was unsure whether an interpretation of the definition of ‘telecommunication’ that captured the iSKY service was correct.10 Sky said that a broad interpretation was probably not intended. Sky agreed with TelstraClear’s view that there is a distinction between conveyance of a programme and the programme itself.

43. In reply, Telecom submitted that the approach proposed by TelstraClear might be appropriate in the Australian context but is not appropriate in New Zealand.11 Telecom disagreed that ‘carriage service’ is broadly analogous to the definitions in the Act. Telecom said that the Australian legislation has a narrower definition of a ‘carriage service’ because it separates out the definitions for ‘carriage’ and ‘content’, which is not supported by New Zealand’s legislation. The Commission agrees with Telecom’s submission.

44. The Commission considers that a ‘telecommunications service’ includes any electromagnetic conveyance service, regardless of what is being conveyed (except the transmission of programmes for reception by the public). The content of the signal is irrelevant in determining whether the conveyance of that signal is a telecommunications service. Accordingly, a myriad of services qualify as telecommunications services even though they convey different kinds of content: data services, facsimile services, internet-based services, video-on-demand, and online gaming.

7 Broadcasting Act 1989, s2. Complete definitions are attached as an appendix. 8 TelstraClear’s submission dated 24 February 2012, pp 7 and 8. 9 Foxtel Management Pty Ltd v Seven Cable Pty Ltd (2000) 102 FCR 555; [2000] FCA 1161. 10 Sky’s submission dated 24 February 2012, p 3. 11 Telecom’s cross-submission dated 2 March 2012, pp 3 and 4.

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45. The Commission disagrees with Sky’s12 and TelstraClear’s13 respective positions that video-on-demand services may not qualify as ‘telecommunication’ and ‘telecommunications services’. So long as the video being provided is not transmitted to the public, it is captured within the definition of telecommunication under the Act, and the conveyance of these images and sounds constitute a telecommunications service. (The issue as to whether a party operates the component of the PTN conveying the images and sounds is discussed further at paragraph 54.)

“By means of” 46. The Commission received several submissions on the meaning of this phrase. supported an approach that defined ‘by means of’ with reference to past Commission determinations.14 Teamtalk had a slightly different perspective: they argued that the Commission should approach the definition of ‘by means of’ by looking at whether the user actually has in some way taken a significant stake in another person’s PTN which is qualitatively different from the rights that a member of the public would have simply by virtue of having access.15

47. ‘By means of’ has been interpreted by the Commission in past TSO decisions. Most recently, in the 2009/10 TSO Cost Allocation Determination, the Commission said that “‘by means of’ is to be understood as requiring a meaningful and not insignificant participation by some component of a PSTN operated by that person in the provision of the service”.16 None of the changes to the Act suggest that an alternate meaning was intended.17

‘Some component of a PTN’ 48. A PTN (or ‘public telecommunications network’) is defined as “a network used, or intended to be used, in whole or in part, by the public for the purpose of telecommunication” and includes a Public Switched Telecommunications Network (PSTN) and a Public Data Network (PDN).

12 Sky’s submission dated 24 February 2012. 13 TelstraClear’s submission dated 24 February 2012 at p 7. TelstraClear submitted that “the definition of “telecommunications service” make clear that it is the goods, services, equipment and/or facilities which enable or facilitate the conveyance of content which are captured by the concept of a “telecommunications service”, not the content itself.” 14 Kordia’s submission dated 23 February 2012, at p 12. 15 Teamtalk’s submission dated 23 February 2012, paragraph 35. 16 2009/10 TSO Cost Allocation Determination, paragraph 16. 17 The former definition of ‘liable person’ provided as follows: Liable person, in relation to a TSO instrument means (except when they are the TSP), -(a) Telecom; and (b) A person-(i) whose network is interconnected with a fixed PSTN operated by Telecom; and (ii) who provides a telecommunications service in New Zealand to end-users by means of some component of a PSTN that is operated by the person.

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49. ‘PSTN’18 and ‘PDN’19 are both defined terms in section 5 of the Act. Both types of networks must be used, or intended for use, by the public.

50. A ‘network’ (a term used in the definition of ‘PTN’) is defined as “a system comprising telecommunication links to permit telecommunication”. A ‘’ means any line, , or other medium used for telecommunication. ‘Comprising’ means “include, contain, especially as making up the whole; extend to, encompass; consist of, be made up of”. Therefore, “comprising telecommunications links” means including, encompassing and extending to cover telecommunications links.

51. A ‘component’ of a PTN is not given definition in the Act. ‘Component’ is defined in the Shorter Oxford English Dictionary as a constituent part (of a larger whole).20

52. Therefore, a liable person must operate a component of a network that is used in whole or part by the public for the purpose of telecommunication.

53. The component of the PTN must fall within the public side of the network demarcation point – neither the end user’s device (e.g. a telephone, laptop or server that is not intended for public use) nor the device which the end-user communicates with are themselves a component of the PTN though both are connected to the PTN. The telecommunication service is the conveyance of signals between these two devices.

‘Operated by that person’ 54. A liable person is a “person who provides a telecommunications service in New Zealand by means of some component of a PTN that is operated by that person.”

55. The component of the PTN must:

55.1 be used to provide a telecommunications service within New Zealand

55.2 be operated by a person providing a telecommunication service.

56. Sky argues that its iSKY video on demand service is provided by means of a PTN operated by Orcon Limited, and ISPs or telecommunications companies. Sky submitted that its content is delivered from Orcon’s Content Delivery Network to internet service providers which deliver the content to end-users. Therefore, Sky submitted that it is not itself operating any component of the PTN over which its service is delivered.

18 A ‘PSTN’ or ‘public switched telecommunications network’ is defined in section 5 as “a dial-up used, or intended for use, in whole or in part, by the public for the purposes of providing telecommunication between devices”. 19 A ‘PDN’ or ‘public data network’ is defined in section 5 as “a data network used, or intended for use, in whole or in part, by the public”. 20 The only other place in the Act where a reference is made to ‘some component of a PTN’ is with respect to the description of ‘eligible person’ in clause 4(4) of the Part 1 of Schedule 2 of the Act.

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57. TVNZ argued that it does not provide its video-on-demand service by means of some component of a PTN that is operated by TVNZ. Instead, TVNZ submitted that TVNZ contracts with third party internet service providers to host and deliver video-on- demand content to end-users, and therefore that they – not TVNZ – operate the service.

58. ‘Operates’ is defined in the Shorter Oxford English Dictionary as “exercise influence; produce an effect; and carry on commercial, professional, etc, activities; produce the intended effect; be in action; be functioning” – this definition is broad and does not limit operation of a network to “ownership” of network infrastructure.

59. The Commission has previously taken a broad approach to the meaning of ‘operates’ in TSO determinations. The Commission has said that the “network operator interconnecting with Telecom must either own or lease the network or otherwise have that network under its control”.21

60. The Commission considers the same meaning should apply in relation to the TDL. For the purposes of the definition of ‘liable person’, a person ‘operates’ a network where that party owns or leases a component of the PTN or has it under its control. Whether or not a person has ‘control’ is a question of fact that must be determined on a case-by-case basis. In assessing whether or not a person has ‘control’, the Commission will consider whether that person has the power to direct, guide or influence the network in question.22 For example, if a person has specific control over the service levels relating to network delivery that person is likely to have control over the network.

61. The Commission therefore considers that a person operates a component of the PTN where they:

61.1 own the component

61.2 have an exclusive right of use of the component (such as a long-term lease or exclusive licence)

61.3 may influence or direct in a material way changes to the quality, nature or performance of the component of the network; or

61.4 may authorise third-party use of, and access to, the component to provide a telecommunication service.

62. A property that supports telecommunications infrastructure would not be caught by this definition of operates a component of the PTN. The Commission considers that the property must have been installed or erected for the purpose of telecommunications, i.e., that it be operated, at least in part, for the purpose of providing telecommunications services. Incidental use by a telecommunications

21 Final TSO Cost Allocation Determination for period 1 July 2009 to 30 June 2010 at paragraph 44. 22 Shorter Oxford English Dictionary. Volume one.

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service provider, such as in leasing building space for a cell site, is not sufficient for a person to be considered to be operating a component of a PTN.

63. Therefore, the mere ability to locate telecommunications network equipment on real property does not itself mean that the owner or lessor of the real property is operating a component of a network. By contrast, the pole or attachment is operated by the service provider who installed the telecommunications network infrastructure, and therefore qualifies as operating a component of the PTN.

64. Parties that provide pole attachment space for telecommunications services are ‘operating’ a component of a public network, and are therefore potentially liable persons. From an engineering and costing perspective, the pole attachment space is generally thought of as part of the network, as for example is a duct. The service they provide is captured within the widely defined “telecommunications service” and is a service that is provided by means of some component of the PTN.

65. The Commission recognises that in some cases the pole provider may also use the pole as a component of another network, ie, electricity, and therefore some allocation may be necessary in order to recognise the dual functionality of the pole. The Commission’s preliminary view is that allocation would be accommodated through the qualified revenue process.

66. Mobile Virtual Network Operators (MVNOs), as opposed to pure re-sellers of mobile services, typically operate a component of a network, such as a switch. Therefore, any MVNO is likely to operate a component of a PTN within the meaning of the Act.

67. The Commission also considers that a person using is operating a component of the PTN, and would therefore qualify as a potentially liable person under the Act.

Private vs. public networks 68. The Act requires that the network be a ‘public’ telecommunications network, that is, it must be used, and intended for use, by the public.

69. There was little in the way of direct submissions on this subject, but a number of positions put forward in submissions by necessity turn on the definition of public and private.

70. Telecom submitted that broadcasting firms can be considered liable persons because the definition of ‘telecommunication service’ is broad and will capture broadcaster’s networks, except when used for broadcasting as defined in the Broadcasting Act.23 Telecom also said that Sky is likely to have an arrangement that allows them to exert a degree of control over at least part of a PTN to deliver video-on-demand services. Telecom considered that providers of programmes in New Zealand that rely on PTN networks or CDNs to provide services should be considered liable persons.

23 Telecom’s response to the Baycity submission dated 7 March 2012.

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71. The Commission’s view is that there is there is a demarcation point between the public and private sides of a PTN. For example, customer premises equipment (CPE) is located on the private side of a network – it needs to be connected to the PTN in order for the end-user to obtain telecommunications services, but the CPE itself is not a “component of a PTN” as it is not a public component of the network.

72. In addition, the use of the network must not be proprietary to a single party. For example, networks used by emergency services are clearly not intended for use by the public, and are therefore not a PTN. There must be means by which a member of the public (used in a broad sense, but not necessarily including every possible member of the public) can feasibly obtain access to the network and use it to communicate with other persons.

73. Consequently, equipment in private networks that enable an end-user to make use of a PTN (be it an individual or web site or content provider) is not a component of the public telecommunications network. Consequently, a phone, machine, personal wi-fi , web server, or a network of content servers, such as a CDN (content delivery network), are not components of a PTN.

74. The Commission therefore considers that Sky, when making available its content on a server (either owned and controlled by Sky, or managed on its behalf by a third party), is not operating a public component of the PTN, and is therefore not on this basis a liable person. The service is in effect one of the devices between which telecommunications are conveyed.

75. Similarly, caching of third party content – such as by operators like Akamai – does not constitute a component of the PTN. It merely provides a point of exit and entry to the PTN for content, which is then conveyed by the operator of the PTN to the end-user.

Limiting the definition of liable person to those supplying telecommunications services to end-users 76. Vector argued that the Commission should restrict the TDL on revenues to retail businesses because it will increase the transparency of the regime, but impose no additional real burden on retail service providers. Vector considered that this approach reflected the intention of the regime that was developed by the Ministry of Economic Development. Vector specifically referred to documentation from the Ministry which said that the recommended approach contemplated liable persons for the TDL to be “all telecommunications carriers operating a public telecommunications access network and selling telecommunications services to end users”.

77. Under the previous TSO liability requirements, the definition required that parties offer services to end-users. This requirement was expressly excluded in the amendments to the Act. The Commission’s view is that Parliament intended to capture major wholesale providers, such as Chorus and the LFCs.

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78. The Act does not refer ‘to end-users’ as a qualification to liability. In the absence of this qualification, the term ‘liable persons’ must be read as it is written, ie, that it includes suppliers of wholesale telecommunications services, and is not limited to retail businesses supplying services to end-users in New Zealand.

Commission’s view 79. The Commission’s position is that in order to be a liable person the service provider must:

79.1 provide a telecommunications service, which may include the transmission of voice, data, SMS, or any other content, but excluding broadcasting (i.e., the transmission of programmes for the reception by the public)

79.2 provide the telecommunications service in New Zealand

79.3 operate the component of the PTN over which the telecommunications service is provided

79.4 operate the component of a PTN that falls within the public side of the network demarcation point – the component must be operated by the service provider, not a third party24

79.5 operate a network that is publicly available i.e., not limited to a proprietary use e.g., Police systems25

80. Therefore, liable parties include retail and wholesale voice and broadband service providers (other than pure resellers), mobile voice operators, and ISPs (this group includes those previously captured by the TSO, plus VoIP operators and ISPs). In addition, wholesale service providers, such as local access network or backhaul service providers, are liable persons. Pure resellers are not liable persons as they do not operate a component of the PTN.

81. Providers of content as services over the internet do not, merely by allowing end- users to access their content and information (whether via on-premises servers or in a third-party hosting facility or cache), operate a component of a PTN. Only if they operate a component of the PTN over which the content is conveyed are they liable.

82. Telecommunication is the conveyance between devices; network means a system comprising interconnected links to permit telecommunications. The devices at the supplier end (a server or cable) and the devices at the receiving end (such as a telephone or personal computer) are not a component of the network.

24 In some circumstances, a party may exercise such control over the performance of this function by another that they may be considered to “operate” the switching functionality through the other party. 25 Any retail service provider or other person must be able to access the network (subject to certain generic conditions precedent).

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Chorus’ liability Commission’s preliminary view 83. Chorus’s position on its liability is that it is not liable to contribute to the TDL as it was not trading to the year prior to financial year A.

84. In contrast, the Commission’s preliminary view on Chorus’ TDL liability for the 2011/12 financial year was that:

…[a]s the Chorus business did operate throughout 2010/11, albeit as a division of Telecom, it is liable to contribute to the TDL. A finding that Chorus is liable to contribute to the TDL would accord with the broad purposes of the TDL, to ensure that all major telecommunications companies in New Zealand contribute to the TDL, and ensure a more even distribution of the TDL across the industry.”

Submissions

85. Most submitters that responded to the question on Chorus’ liability thought Chorus was liable for the 2011/12 year and that if Chorus was not liable this would lead to a distorted market and inappropriate levying. Those parties that thought Chorus was liable included Vector, Kordia, , TelstraClear, , InternetNZ and BayCity Communications.26

86. In contrast, Chorus and TUANZ argued that Chorus should not be liable to contribute to the TDL in the 2011/12; although both agreed that liability would arise in the second year of the TDL.

87. Vodafone argued27 that section 81 was about protecting start-up companies and small businesses. They argued that, as Chorus is an existing business and is a large operator, excluding Chorus falls outside the intention and purpose of section 81. Vodafone also submitted that the Commission must treat Chorus and Telecom as one entity up until demerger, when assessing the application of section 81.

88. TelstraClear indicated28 that the Interpretation Act does not require incorporation for a person to exist, meaning that Chorus Ltd would not be excluded under section 81 even though it was not incorporated until 2011. TelstraClear considered that the legislative emphasis in section 81(1)(a) is on whether or not a person was ‘trading’ as a collective body regardless of its legal form. Furthermore, TelstraClear along with Vodafone, 2Degrees and Kordia thought old Telecom’s Operational Separation Undertakings strengthened the argument that Chorus was a separate entity because it was required to operate independently. TelstraClear cross-submitted that Chorus’s liability was clearly contemplated by Parliament and anticipated by the previously integrated Telecom Group.29

26 The Commission received 9 comments on Chorus’ 2011/12 TDL Liability out of 14 submissions – 7 thought Chorus was liable and 2 thought Chorus was not liable. 27 Vodafone’s submission dated 24 February 2012. 28 TelstraClear’s submission dated 24 February 2012. 29 TelstraClear’s cross-submission dated 2 March 2012, p 3.

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89. Vector considered30 that there is no intention in the Act to exclude Chorus from liability, and that liability attaches to the business irrespective of the legal ownership structure.

90. TeamTalk were concerned31 with ensuring that the rest of the industry not incur any additional liability as a result of Telecom’s internal restructuring.

91. Telecom submitted32 that the issue of Chorus’s liability is not clear-cut and there are various interpretations that could be supported. Telecom confirmed that it supported an approach that best reflects the policy objectives and ensures the application of the levy amongst all legitimate industry participants.

92. Chorus argued that it was not a separate company in 2010/11 and cannot be liable to contribute to the TDL on the clear wording of the Act.33 Chorus disagreed with Vodafone’s argument that section 79 of the Act (which sets out the criteria for when two or more companies must be treated as one person) means that Telecom and Chorus should be treated as one liable person for TDL purposes. Chorus considered that section 79 is irrelevant as Chorus is neither a subsidiary nor an associate of Telecom. Chorus said that Chorus is an entirely separate and independent company without the ability to exert a substantial degree of influence over Telecom.

93. TUANZ agreed with Chorus’ that Chorus is ineligible for the TDL.

Commission’s view 94. Under section 81(1) of the Act, a liable person is excluded from liability for the TDL if it was not trading in the preceding financial year. It does not require a person to have existed in the same form (eg incorporated or unincorporated) or with the same name or GST number, only that it be a person in existence in that previous financial year.

95. To be trading means to be carrying on business or trade. Chorus has asserted that it is not liable for the TDL as it was not incorporated, and therefore, was not trading in the previous financial year. Whether or not Chorus was incorporated in the previous financial year is not the decisive point. The Commission considers that Chorus was carrying on business (appropriately then constituted) as the operationally separated business unit of Telecom. In addition to the fact that the assets, management, operations and personnel have continued to operate throughout the separation process, the evidence indicates that Chorus Limited continues to be comprised of the trading “person” that existed prior to separation.

96. Therefore, it is clear that Chorus is a liable person under section 81(1) of the Act.

30 Vector’s submission dated 22 February 2012. 31 TeamTalk’s submission dated 23 February 2012. 32 Telecom’s cross-submission dated 2 March 2012. 33 Chorus’s cross-submission dated 2 March 2012 at page 3.

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Identifying liable persons Commission’s preliminary view 97. In the Commission’s Discussion Document, the Commission proposed identifying liable persons by reference to the list of persons identified in previous liability determinations (TSO and, in the future, TDL) and the Register of Chorus’ Non-retail Users (the Register).

Submissions 98. TelstraClear submitted34 that the Commission’s approach was adequate for identifying traditional telecommunications operators. TelstraClear believed that the Register does not consider the full range of potentially liable persons, particularly when the wider range of telecommunications service providers is considered. TelstraClear said that the modern telecommunications market sees “traditional” companies such as TelstraClear competing against a range of non-traditional providers, who utilise TelstraClear’s networks to provide services over-the-top of their infrastructure. TelstraClear referred to international corporations such as and who use Voice Over Internet Protocol (VoIP). TelstraClear also noted that video products compete against their toll-calling products.

99. Vodafone submitted35 that given the broadened definition of potentially liable persons, it is possible that potentially liable persons will meet the Commission’s criteria but would not have contributed to the previous TSO determinations or be included in the Chorus register of non-retail users. Vodafone said that the new definition would capture providers of, among other things, managed , satellite services, and passive communications infrastructure such as dark fibre, and that therefore the Commission will need to take a broader approach to identifying liable persons.

100. Internet NZ said36 that Crown Fibre Holdings may be in a position to assist with identifying liable persons and also noted that Enable Networks and Northpower were not included in the Commission’s list of potentially liable persons.

101. Chorus did not consider that the Commission’s mechanism for identifying liable persons was adequate.37 Whilst they acknowledged that the Commission’s starting point is sensible, Chorus thought that the proposed approach excluded RSPs who purchase services from a Chorus customer, network operators who do not also purchase services from Chorus and other LFCs. As alternative options, Chorus suggested that: (a) the Commission ask all those listed on the Register of Chorus’ Non-retail Users for a list of their wholesale customers and (b) the Commission publish a draft list each year and ask people to identify any companies that they think have been omitted. Chorus also suggested that the Commission could request

34 TelstraClear’s submission dated 24 February 2012, pp 3 and 4. 35 Vodafone’s submission dated 24 February 2012, p 8. 36 Internet NZ’s submission dated 28 February 2012, p 2. 37 Chorus’s submission dated 24 February 2012, p 4.

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information on parties to , peering and caching agreements to help identify liable persons.38

102. Telecom agreed with the Commission’s approach. Telecom suggested, however, that the Commission should clarify situations where it may not require firms to provide financial information, ie, where a firm is clearly a liable person through reported financial information and accepts that status. They said that if financial information is required, the Commission should request information that is already available rather than requiring the creation of another ‘new’ set of financial information.

103. 2Degrees thought39 that the Commission’s approach was a good starting point, but noted that the approach will not provide a complete picture of all potentially liable persons. 2Degrees suggested that the Commission investigate interconnection agreements and other agreements related to peering and caching.

Commission’s view 104. The Commission has based its initial assessment on service providers who are network operators, access seekers and access providers under the Act, local fibre companies (LFCs), listed on Chorus’ register of non-retail users, and other sources. The Commission will also rely on the exercise of its market monitoring powers in order to capture any other potentially liable persons. It is through the exercise of those powers that latest market developments are revealed which, in turn, will inform the preparation of an accurate list of potentially liable persons.

105. After receipt of submissions and cross-submissions on this draft notification, the Commission is likely to undertake the following steps:

105.1 the Commission may issue separate notices under section 98 of the Commerce Act to obtain additional information from access and wholesale service providers regarding their agreements with retail service providers and other parties, including interconnection agreements and other wholesale input services (The Commission, in line with its conclusions regarding the necessary requirements of a liable person, will not be asking for information regarding pure resellers)

105.2 the Commission will confirm the list of liable persons and prepare a register of liable persons which will be uploaded to the Commission’s website

105.3 the Commission will request financial information from liable persons for the year preceding financial year A.

106. The Commission has applied the statutory criteria to known service providers likely to be liable persons to determine which service providers meet the definition of liable person discussed above. The current list of liable persons, subject to any new information coming to light identifying other liable persons, is attached. The

38 Chorus’s cross-submission dated 2 March 2012, p 2. 39 2Degrees’ submission dated 24 February 2012, p 4. 2Degrees cross-submission dated 2 March, p 3.

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Commission is satisfied that these service providers are potentially liable persons within the meaning of the Act.

107. The Commission encourages submitting parties to advise the Commission if potentially liable persons have been omitted from the list of liable persons that is attached to this notification.

Other liable persons 108. While the Commission has attempted to identify all potentially liable persons using a variety of sources, liability arises under sections 82 and 83 of the Act regardless of whether the Commission has issued a determination that a party is a liable person within the meaning of the Act. Parties that fail to provide the required information in accordance with sections 82 and 83 may be the subject of enforcement action in accordance with Part 4A of the Act.40 Therefore, service providers should perform a self-assessment against the requirements for liability set out in the Act, and notify the Commission if they may be potentially liable.

109. As advised previously41, for the 2011/12 year, the Commission accepts that liable persons will have a reasonable excuse for not providing the financial information required under section 82. This is because the Commission is not able, within the timeframe set out in section 82, to identify all liable persons that would be required to provide information under this provision. The Commission will request this financial information (under either section 81 of the Telecommunications Act or section 98 of the Commerce Act42) when all liable persons have been identified.

Consultation 110. Submissions are invited on the list of potentially liable persons by 5pm on Wednesday 9 May 2012. Cross-submissions will then be due by 5pm on Wednesday 23 May 2012.

111. Submissions and cross-submissions should be sent by email to: [email protected].

Next steps 112. The Commission will prepare a draft information request for the purposes of prescribing qualified revenue for consultation within the next month. Following consultation with parties, the Commission will issue a notice for additional information to be used to calculate qualified revenue that liable persons will be required to produce for the Commission for the purposes of determining their TSO liability.

113. After that information is received, the Commission will issue its draft TDL liability determination in accordance with section 88 of the Act.

40 See, specifically, clauses 156A(j) and (k) of Part 4A of the Act. 41 Commission’s email to the industry dated 28 March 2012. 42 Section 98 of the Commerce Act 1986 is an available power due to section 15(f) of the Telecommunications Act

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Dr Ross Patterson, Telecommunications Commissioner

Dated at this XX day of April 2012.

COMMERCE COMMISSION

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Attachment 1 Relevant Statutory Provisions

Telecommunications Act 2001 5 Interpretation … fixed PTN (a) means a PDN, or that part of a PDN, that connects an end-user’s building (or, in the case of commercial buildings, the building distribution frames) to a data switch or equivalent facility; and (b) includes the data switch or equivalent facility and that part of the overall telecommunications link within the building that connects to the end-user’s equipment fixed PSTN— (a) means a PSTN, or that part of a PSTN, that connects an end-user’s building to the local switches or equivalent facilities; and (b) includes those local switches or equivalent facilities … liable person means a person who provides a telecommunications service in New Zealand by means of some component of a PTN that is operated by the person … PDN or public data network means a data network used, or intended for use, in whole or in part, by the public … PSTN or public switched telephone network means a dial-up telephone network used, or intended for use, in whole or in part, by the public for the purposes of providing telecommunication between telephone devices PTN or public telecommunications network— (a) means a network used, or intended to be used, in whole or in part, by the public for the purpose of telecommunication: (b) includes— (i) a PSTN: (ii) a PDN … telecommunication— (a) means the conveyance by electromagnetic means from one device to another of any encrypted or non-encrypted sign, signal, impulse, writing, image, sound,

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instruction, information, or intelligence of any nature, whether for the information of any person using the device or not; and (b) for the purposes of subpart 2 of Part 4, includes any conveyance that constitutes broadcasting; but (c) for all other purposes, does not include any conveyance that constitutes broadcasting telecommunication link means any line, radio frequency, or other medium used for telecommunication … telecommunications service means any goods, services, equipment, and facilities that enable or facilitate telecommunication telephone device means any terminal device capable of being used for transmitting or receiving any communications over a network designed for the transmission of voice frequency communication

Part 3 Telecommunications service obligations Subpart 2—Amounts payable by liable persons to the Crown Annual procedure for determining amounts payable by liable persons to the Crown 80 Interpretation In this subpart, unless the context otherwise requires,— financial statements,— (a) except if section 79 applies, has the same meaning as in section 8 of the Financial Reporting Act 1993; and (b) if section 79 applies, means a consolidated statement of financial performance of the 2 or more bodies corporate required by that section to be treated as 1 person, prepared in accordance with generally accepted accounting practice, as defined in section 3 of the Financial Reporting Act 1993 minimum telecommunications revenue means $10 million, or such other amount, as may be prescribed by regulations made under section 101(1)(a), of gross revenue (as may be determined in accordance with any specifications set by the Commission) that a liable person receives during a financial year for supplying either or both of the following (excluding any amount paid to a liable person by the Crown as compensation for the cost of complying with a TSO instrument that contains a specified amount): (a) telecommunications services by means of its PTN: (b) telecommunications services by means that rely primarily on the existence of its PTN or any other PTN.

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81 Subpart does not apply to certain liable persons (1) This subpart does not apply to a liable person in respect of a financial year (financial year A) if— (a) the liable person was not trading in the financial year preceding financial year A; or (b) the liable person’s telecommunications revenue for the year preceding financial year A was less than the minimum telecommunications revenue. (2) For the purpose of determining whether a person is a liable person to whom this subpart applies in respect of a financial year, the Commission may, by written notice to that person, require the person to provide to the Commission, within the time specified in the notice,— (a) a copy of the person’s financial statements for the year preceding financial year A; and (b) any further information specified by the Commission for the purpose of enabling it to verify the telecommunications revenue of that person for the year preceding financial year A; and (c) a certificate that complies with subsection (3). (3) A certificate complies with this subsection if— (a) it certifies the person’s telecommunications revenue for the year preceding financial year A; and (b) it is signed by 2 directors of the person with the authority of the other directors.

82 Liable persons must produce information on qualified revenue Not later than 60 working days before the end of each financial year (financial year A), each liable person must provide to the Commission a copy of— (a) its financial statements for the financial year preceding financial year A; and (b) any further information specified by the Commission for the purpose of enabling it to verify the qualified revenue of that person for the financial year preceding financial year A. 83 Liable persons must produce information for purposes of liability allocation determination (1) Not later than 60 working days after the end of each financial year, each liable person must provide to the Commission— (a) all prescribed information or, if there is no prescribed information, information specified by the Commission, for the purpose of enabling the Commission to make its determination in accordance with section 88(a); and (b) a report that complies with subsection (2). (2) A report complies with this subsection if— (a) it is prepared by a qualified auditor; and

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(b) it includes a statement of the extent to which the information provided by the liable person under subsection (1)(a) is correct and complete. 84 Commission to prepare draft liability allocation determination (1) The Commission must— (a) prepare a draft liability allocation determination for each financial year; and (b) give public notice of that draft determination; and (c) include in the public notice the closing date for submissions, which must be not later than 20 working days after the date of giving public notice. (2) The Commission must make reasonable efforts to do the things referred to in subsection (1) not later than 80 working days after the end of the financial year. 85 Matters to be included in draft liability allocation determination (1) A draft liability allocation determination must include— (a) the amount of each liable person’s qualified revenue; and (b) the amount of the telecommunications development levy payable by each liable person for the financial year, calculated in accordance with the following formula:

where— a is the amount of the liable person’s qualified revenue b is the sum of all liable persons’ qualified revenue c is the telecommunications development levy specified for the relevant year in Schedule 3B; and (c) the methodology applied by the Commission in preparing the determination; and (d) the reasons for the determination. (2) To avoid doubt, the Commission may determine what revenue basis to use for the purposes of subsection (1)(a) (for example, a net revenue basis). 86 Conferences on draft liability allocation determination The Commission may— (a) hold conferences in relation to the draft liability allocation determination; and (b) invite to those conferences any person who has a material interest in the determination. 87 Commission to prepare final liability allocation determination (1) The Commission must— (a) prepare a final liability allocation determination; and (b) give public notice of that final determination; and

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(c) give a copy of that final determination to all liable persons. (2) The Commission must make reasonable efforts to do the things referred to in subsection (1) not later than 20 working days after the closing date for submissions specified in accordance with section 84(1)(c). 88 Matters to be included in final liability allocation determination A final liability allocation determination must include— (a) the amount of each liable person’s qualified revenue; and (b) the amount of the telecommunications development levy payable by each liable person, calculated in accordance with the formula set out in section 85(1)(b); and (c) the methodology applied by the Commission in preparing the determination; and (d) the reasons for the determination. 89 Payment by liable persons to the Crown (1) Each liable person must pay to the Crown the amount set out in the determination in accordance with section 88(b) not later than 20 working days after the date that the determination is publicly notified. (2) If that amount is not paid on or before the due date,— (a) it is recoverable in any court of competent jurisdiction as a debt due to the Crown; and (b) the liable person must pay the Crown interest on the unpaid amount at the 90- day bank bill rate (as at 21 working days after the date on which the determination is publicly notified) plus 5% for the period from the time the amount was due until the time at which it is paid. (3) Subsection (2) does not authorise the imposing of interest on interest. General matters 90 Crown use of telecommunications development levy (1) The amounts paid by liable persons under section 89 (collectively, the telecommunications development levy) may be used for the following purposes: (a) to pay TSO charges: (b) to pay for non-urban telecommunications infrastructure development: (c) to pay for upgrades to the emergency service calling system: (d) any other purpose that the Minister considers will facilitate the supply of certain telecommunications services to groups of end-users within New Zealand to whom those telecommunications services may not otherwise be supplied on a commercial basis or at a price that is considered by the Minister to be affordable to those groups of end-users. (2) The telecommunications development levy must not be used for a purpose under subsection (1)(d) unless the Minister has first consulted liable persons and any persons

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and organisations that the Minister considers appropriate having regard to the proposed use of the levy. (3) To avoid doubt, except as provided in section 94L, nothing in this section requires the Crown to use any amount paid by liable persons under section 89 within any particular time. 91 Commission must notify final liability allocation determination before notifying TSO cost calculation determination (1) The Commission may determine the priority between the preparation of a liability allocation determination and the preparation of a TSO cost calculation determination and, accordingly, may comply with sections 84 to 88 and sections 94F to 94K in the sequence, as between those 2 sets of sections, as it thinks fit. (2) However, the Commission must publicly notify a final liability allocation determination for each financial year in accordance with section 87(1)(b) before it publicly notifies any final TSO cost calculation determination for that financial year in accordance with section 94J(1)(b). 92 Annual telecommunications development levy may be reduced by Order in Council (1) The Governor-General may, by Order in Council made on the recommendation of the Minister, amend Schedule 3B by reducing the annual telecommunications development levy set out in that schedule for 1 or more future years. (2) The Minister must not recommend the making of an order unless the Minister is satisfied that the full amount set out in Schedule 3B is not required for the purposes in section 90.

Broadcasting Act 1989 2 Interpretation broadcasting means any transmission of programmes, whether or not encrypted, by radio waves or other means of telecommunication for reception by the public by means of broadcasting receiving apparatus but does not include any such transmission of programmes— (a) made on the demand of a particular person for reception only by that person; or (b) made solely for performance or display in a public place … content, in relation to transmitting on demand, means— (a) programmes: (b) visual images that consist predominantly of alphanumeric text and software intended to— (i) inform, enlighten, or entertain; or (ii) promote the interests of any person; or (iii) promote any product or service

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… programme— (a) means sounds or visual images, or a combination of sounds and visual images, intended— (i) to inform, enlighten, or entertain; or (ii) to promote the interests of any person; or (iii) to promote any product or service; but (b) does not include visual images, whether or not combined with sounds, that consist predominantly of alphanumeric text

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Attachment 2 Liable Persons The Commission’s preliminary view is that the following parties meet the criteria for ‘liable person’ in s 5 of the Telecommunications Act 2001. However, in accordance with s 81 of the Act, these potentially liable persons will only be liable for contribution to the TDL for the 2011/12 financial year if: 1. they were trading in the 2010/11 financial year, and

2. they had gross telecommunications revenue in 2010/11 greater than or equal to the minimum telecommunications revenue.

Actrix Networks Ltd Networks Pty Ltd Airnet NZ Ltd Snap Internet Ltd Bay City Communications Ltd Teamtalk Ltd46 43 Araneo Ltd CallPlus Ltd Citylink Ltd Slingshot Ltd Telecom Corporation of New Zealand Chorus New Zealand Ltd/Chorus Ltd LTD/Telecom New Zealand Ltd Compass Communications Ltd TelstraClear New Zealand Ltd Crown Fibre Holdings Ltd44 thepacific.net Ltd Whangarei Local Fibre Company Ltd (Northpower Ltd) Trustpower Ltd

Ultrafast Fibre Ltd Two Degrees Mobile Ltd ( Networks Ltd) Ultrafast Broadband Ltd Datacom Systems Ltd Vector Communications Ltd Enable Networks Ltd Verizon New Zealand Ltd FX Networks Ltd Ltd Inspire Net Ltd Woosh Wireless Ltd Kordia New Zealand Ltd45 WorldxChange Communications Ltd Orcon Ltd

Network Tasman Ltd

43 CallPlus Ltd wholly owns Slingshot Ltd; under s79 of the Act they are assessed as one company. 44 Crown Fibre Holdings Ltd owns 53% of Whangarei Local Fibre Company Ltd and 80% of Ultrafast Fibre Ltd; under s79 of the Act they are assessed as one company. As both Northpower Ltd and Waikato Networks Ltd have more than 20% interests in the Whangarei Local Fibre Company Ltd and Ultrafast Fibre Ltd respectively, they are also assessed together as part of Crown Fibre Holdings Ltd block of companies in accordance with s79. 45 Kordia New Zealand Ltd wholly owns Orcon Ltd; under s79 of the Act they are assessed as one company. 46 Teamtalk Ltd wholly owns Citylink Ltd and 96% of Araneo Ltd; under s79 of the Act they are assessed as one company.

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