Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Copper regulation pits fibre investors against consumers

Copper lines regulation pits fibre investors against consumers

By Paul McBeth

Feb. 4 (BusinessDesk) - The Commerce Commission's draft regime for pricing network company Chorus's copper lines has divided submitters into investors pushing for a backdown by the regulator and consumer lobby groups and retailers supporting the initial version.

The draft determination from Telecommunications Commissioner Stephen Gale highlights an "incoherent policy environment" and risks undermining the government's vision for a nationwide ultra-fast broadband network, Chorus said in a submission on the draft determination.

Submissions were published on the commission's website.

That was because it would promote legacy services delivered over copper lines, over new generation fibre.

The company has applied for a final pricing principle (FPP) to find the true cost of the services rather than relying on a benchmark using international comparisons.

"The current regulatory uncertainty, the disappointingly low level of the draft determination and the incremental nature of the changes to the copper regime, means that Chorus feels compelled to apply for an FPP on UCLL (unbundled copper local loop)," the company said.

"Absent any other intervention we consider we have no option but to request application of the FPP to protect Chorus's interests and provide fairer investment signals for the industry."

Chorus estimates the draft determination lowering the prices the company can charge for unbundled bitstream access service will shave as much as 40 percent from its earnings. Among concerns for the network operator is that cheaper services on copper lines will undermine take-up of fibre-based services.

The regulator proposes a monthly regulated price of $32.45 for UBA, down from $44.98 at present.

Chorus shares rose 1.1 percent to $2.88 in trading today, and have shed 15 percent since the determination was made on Dec. 3.

Chorus found support from local fibre companies Enable Networks, Whangarei Local Fibre Company and Ultrafast Fibre, which also received government subsidies to build the UFB network, and also from fund manager Devon Funds Management.

The fund manager says the regulator's draft determination on the price was too low and "doesn't reconcile with market evidence of the forward looking costs of providing a nationwide broadband service in New Zealand."

The draft decision rankled policymakers, with Prime Minister John Key calling the move “very problematic” and Communications Minister Amy Adams referring it to her officials to assess the pricing impact, saying a pricing methodology appropriate to New Zealand had to be found.

The Telecommunications Users Association said it was "gravely concerned" over the potential for political interference after the commission had followed the law as it's written, fearing it could undermine the regulator's good work.

The lobby group said Chorus shouldn't have been surprised by the draft decision, with the industry discussing the law at some length in the lead-up.

"TUANZ is also concerned that putting the earnings of one company ahead of the reduction in price will see consumers (both business and home users) disadvantaged," it said.

Chorus's customers, including retail internet service providers, disagreed with its stance, with Telecom saying it has seen no evidence that lower UBA prices will undermine fibre uptake, and Kordia and CallPlus jointly submitting that the network operator has "many options to extract additional margin over and above the regulated price."

Wholesale prices for access to the copper lines were averaged as a result of legislation enabling Telecom to carve out its Chorus unit last year, something that annoyed rival telecommunications companies who said it would lift their costs.

At the time of the enabling legislation, Ministry of Economic Development officials downplayed concerns about the impact on copper-line prices, saying it wasn't "deemed significant" and that any increase in UCLL pricing may "have the positive impact of encouraging more investment and innovation on fibre."

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Half Full: Dairy Payouts Steady, Cash Will Be Tight

Industry body DairyNZ is advising farmers to focus on strong cashflow management as they look ahead to the 2015-16 season following Fonterra's half-year results announcement today. More>>

ALSO:

First Union: Cotton On Plans To Use “Tea Break” Law

“The Prime Minister reassured New Zealanders that ‘post the passing of this law, will you all of a sudden find thousands of workers who are denied having a tea break? The answer is absolutely not’... Cotton On is proposing to remove tea and meal breaks for workers in its safety sensitive distribution centre. How long before other major chains try and follow suit?” More>>

ALSO:

Scoop Business: NZ-Korea FTA Signed Amid Spying, Lost Sovereignty Claims

A long-awaited free trade agreement between New Zealand and South Korea has been signed in Seoul by Prime Minister John Key and the Korean president, Park Geun-hye. More>>

ALSO:

PM Visit: NZ And Viet Nam Agree Ambitious Trade Target

New Zealand and Viet Nam have agreed an ambitious target of doubling two-way goods and service trade to around $2.2 billion by 2020, Prime Minister John Key has announced. More>>

ALSO:

Scoop Business: NZ Economy Grows 0.8% In Fourth Quarter

The New Zealand economy expanded in the fourth quarter as tourists drove growth in retailing and accommodation, and property sales increased demand for real estate services. More>>

ALSO:

Scoop Business: RBNZ’s Wheeler Keeps OCR On Hold, No Rate Hikes Ahead

The Reserve Bank has removed the prospect of future interest rate hikes from its forecast horizon as a strong kiwi dollar and cheap oil hold down inflation, and the central bank ponders whether to lower its assessment of where “neutral” interest rates should be. The kiwi dollar gained. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news