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Chorus pricing decision very problematic, says Key

Chorus pricing decision very problematic, says Key

By Pattrick Smellie

Dec. 3 (BusinessDesk) - The Telecommunications Commissioner's draft decision on access to switchgear on the copper telecommunications network is "very problematic" and the government won't rule out legislating to get the outcome it wants, says Prime Minister John Key.

His comments came as shares in the copper network owner, Chorus, fell 14 percent to $2.91, three cents lower than its listing price when it was separated from Telecom in November last year as a fundamental part of reforms associated with the government's $1.35 billion subsidy for an ultra-fast broadband network.

Telecommunications Commissioner Stephen Gale's decision is good for consumers, at least short term, because it requires lower than expected prices for access to the existing telecommunications network, which is based on copper wire.

But it threatens to undermine the uptake of UFB by making copper more competitively priced than the new fibre-based network. Copper-based services are unable to deliver broadband speeds as high as through the UFB fibre network, but technology improvements make it very fast and lower prices could keep it competitive with UFB for longer.

The UFB network is a flagship government policy, but requires uptake of UFB to ensure roll-out of the network continues to spread, as revenues from uptake will be funnelled back into further expanding the network.

If consumers stay with copper-based services for longer, the UFB roll-out risks stalling for lack of demand.

Key pointed out at his post-Cabinet press conference that an earlier draft decision from Gale's predecessor, Ross Patterson, on pricing for the unbundled local loop, had been substantially modified after submissions.

Both Chorus and Telecommunications Minister Amy Adams had indicated serious concerns about the draft decision on unbundled bitstream access (UBA) before Key's comments, with Chorus warning it could cut earnings by up to $160 million a year.


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