Telecom says the Government's plan to scrap the levy it gets for supplying phone lines to commercially unviable rural customers is flawed.
Communications Minister Steven Joyce wants to replace the Telecommunications Service Obligations levy, or TSO, with a new levy to fund the roll out of ultra fast broadband in rural areas.
Telecom's submission says the Government's proposal would make it even more uneconomic to invest in rural areas.
It warns that the planned $300 million investment in rural broadband will not be enough to provide, among other things, a high-speed service to more than 90% of rural schools within six years.
Telecom currently gets about $70m a year from competitors towards the cost of providing phone lines to rural areas.
The Government instead wants to charge companies a levy to help roll out ultra-fast broadband in rural areas.
Telecom says the Government's assumption that it does not cost anything to provide services to rural customers is flawed, saying it has spent $115m on phone networks in rural New Zealand over the past year, and plans to spend $300m over the next decade.
Telecom wants the Government to modify its proposal, saying the new levy should be funded mostly by the Government or that all bill payers should share the cost.
It says any future investment in upgrading or replacing voice infrastructure above and beyond the bare minimum will be difficult to justify.
The company says its own analysis of the likely costs needed for improving rural broadband is between $500m and $600m, if the company's existing infrastructure is used as a starting point.
It warns the figure would be significantly higher if that infrastructure is not used.
