Supreme Court Rulings, Discretionary Power and Statutory Obligations: On the Meaning of the Word ‘Must’ in Telecommunications Regulation

Abstract

The purpose of this essay is to explore the meaning of the word ‘must’ in a regulatory setting. The regulator in question is the Commerce Commission of New Zealand and the matters at stake are its obligations under the Telecommunications Act 2001 to determine the net cost for commercially non-viable customers under a levy to industry known as the Telecommunciations Service Obligation (TSO). The Commission has been found in error by the High Court and upheld by the Supreme Court on two points of law. Therefore it must do something. What is at stake is the interesting question that by not taking further action i.e. making the determinations (decisions) for the years in question, may result in a set of outcomes that better serve the purpose of the Act than by making legally binding but meaningless and costly decisions due to the fact that the industry has now settled the matter by means of commercially binding settlements. This places the regulator in strange situation whereby it is still subject to statutory obligations under the Telecommunications Act but at the same time is attempting to find a low cost and practical solution to what is in effect a closed matter. The primary reason that the regulator finds itself in the middle of the situation is that firstly, it has certain statutory obligations that it must take very seriously. Secondly, one of the functions of an efficient economic regulator, irrespective of the industry that it is attemtping to constrain, is the matter of industry settling disputes, without recourse to an independent arbiter. Prior to the Telecommunications Act 2001 the final arbiter for dipsute resolution was litigation primarily via competition law and the Courts. This is well known to be costly, lengthy and inefficent. The case of the TSO therefore cuts to the primary purpose of having an independent regulator in the first instance i.e. to mitigate the litgation risk and to resolve disputes without smaller parties being subject to the scale economies of bargaining power of the erstwhile incumbent, especially in the case of access provsion. The first section provides the backround to the TSO resolution issue. I then provide two competing interpretations of the regulators’ obligations that centre on the meaning and implications of the word ‘must’ in this context. Finally, I suggest a set of options that are available to the regulator in light of these diametrically opposing interpretations and conclude by suggesting that the regulator’s statutory obligations are outweighed by any differential meaning of the word ‘must.