Strategic Interaction under Asymmetric Regulation - Adoption, Usage, and Global Impact of Broadband Technologies - page 24

context in the sector. Section 2 discusses how,
when competition emerged, strategic interaction
arising from differing expectations about the al-
location of 'Kiwi Share' costs between Telecom
and its competitors influenced the subsequent
direction of regulatory policy and legislation. In
Section 3, the asymmetric effect of the 'free local
calling' obligation upon Telecom in the face of
both competition and dynamic technological
change with the emergence of the internet is
discussed. Section 4 then considers the ongoing
strategic interaction arising between the firms and
government specifically as a consequence of the
historic asymmetric application of the obligations.
Section 5 concludes with a discussion of the
broader implications of asymmetric contractual
obligations that emerge from the New Zealand
case study.

prices and the geographical location and order in
which investments occurred.
The consequence was a sector inured to the
exertion of both market and political power by
a provider backed by the force of formal rule-
making. The sole recourse for redress for any
consequences of the inappropriate exertion of
those powers open to sector participants was via
political mediation (Howell & Sangekar, 2009).
When Telecom was privatised, although the gov-
ernment retained the power to create the legislative
framework under which the firm operated (level
2), most of the obligations and expectations his-
torically undertaken under government ownership
were transferred to Telecom, either formally via
contracts, or informally via cultures, expecta-
tions and norms (Williamson, 2000). Indeed,
a popular public expectation prevailed that the
newly-privatised firm would continue to exert its
monopoly powers in the same manner as had its
former government owner, by actively preventing
the development of competition.
However, it is also probable that in the public
mind, and despite privatisation and market lib-
eralisation, many of the informal expectations of
government (for example, the power to exercise
redistributive social agendas via telecommunica-
tions service pricing and provision) remained in
force. As government had retained the legislative
power to govern the legal and regulatory environ-
ment in which Telecom and its competitors would
operate, then electoral pressure would inevitably
be applied to ensure Telecom continued to deliver
the social objectives to which consumers had be-
come inured to under government ownership and
operation. For example, the expectation existed
that the government's obligation to safeguard
social inclusion by ensuring telecommunications
connectivity for rural residents did not become
unaffordable (TCF, 2008:4) would not just con-
tinue unchanged under the new arrangements, but
would be enforced via political processes.

THE 'KIWI SHARE' OBLIGATIONS

Although the three obligations comprising the
'Kiwi Share' were formalised in the deed between
the New Zealand government and Telecom on
September 12, 1990 (Howell, 2007:15), each of
the individual elements had been long-established
artefacts of the New Zealand telecommunications
sector. The 'Kiwi Share' principles were effec-
tively informal institutions arising historically
from government ownership, control, regulation
and provision of all New Zealand telecommu-
nications services. The conflation of politics,
state asset ownership and government service
provision between 1880 and 1990 resulted in all
technological and market decisions being subju-
gated to political activities (Howell & Sangekar,
2009). For example, Howell (2007) documents the
political petitioning processes that rural residents
had to undertake in order to become connected
to the network 3 . Political priorities, rather than
commercial imperatives, dominated the deter-
mination of budget sizes, technological choices,