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Regulation to blame for sharp copper price cut, lawyer says

Regulation to blame for sharp copper price cut, not Commerce Commission, lawyer says

By Paul McBeth

March 18 (BusinessDesk) - Sweeping changes to laws governing the telecommunications sector were to blame for size of the drop in what Chorus can charge for access to its copper lines services, rather than the Commerce Commission’s decision to impose the cut, the High Court heard today.

Counsel for the regulator, John Farmer QC, rejected claims by Chorus that it had erred in law by choosing two nations to act as a benchmark price without an evidential basis or that it hadn’t correctly followed section 18 of the Telecommunications Act, which seeks to minimise the risk regulation would have on investment and innovation in the sector.

Farmer said the shift in how the commission would set the price using a forward looking cost-based model informed the new price, which had previously been set using retail pricing under a vertically-integrated monopoly.

“It was the change in regulation that caused the shock, not the Commerce Commission decision made under that new regulation,” Farmer told the High Court in Wellington.

The regulator didn’t need to account for the section 18 provision throughout the whole process, and only had to show the piece of the act wasn’t ignored, he said.

Chorus is appealing the commission’s final determination in November last year setting the unbundled bitstream access monthly price at $34.44 per line, up from the $32.35 price initially mulled in its draft decision, with the additional UBA component accounting for $10.92 and the unbundled copper local loop accounting for $23.52.

Earlier today David Goddard QC, counsel for Chorus, said the company wants to have the initial decision set aside if it’s successful in its appeal, for the commission to undertake the review again. The initial pricing principle is a proxy for the regulator to try and determine the full-cost of replacing the copper network using international comparisons, rather than going through a more rigorous process called a final pricing principle.

Goddard said such a review shouldn’t undermine the work that’s already underway to determine a final price, as a separate component of the copper network, the unbundled copper local loop, is still proceeding.

Justice Stephen Kos said he would have “serious reservations” about the impact of setting aside the review and ordering the process to start again.

The judge-alone hearing is into its second day, and is continuing.


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