If this is true, then they have essentially boycotted the region they are trying to raise the standard of - if everyone got on board with the FSPL then it would be a far more competitive league. And there are good sides down there, they just need an injection of a little more quality in some areas.
No reason to believe it is not true as info coming from both Dunedin and up here in Christchurch so all should have clearer after Southern United's final game over the weekend.