Further draft decisions on prices of copper lines

Commission releases further draft decisions on prices of copper lines and broadband service for consultation

The Commerce Commission has today released further draft decisions for consultation setting proposed prices that Chorus can charge for use of its local copper lines and broadband service over the next five years. These are wholesale prices that Chorus charges retail telecommunications companies.

The proposed maximum monthly rental prices that Chorus can charge for its unbundled copper local loop (UCLL) and unbundled bitstream access (UBA) service change slightly over the five years, but average $27.59 and $10.84 per month respectively. The total price Chorus can charge for its wholesale broadband service averages $38.43 per month.

The total price is nearly identical to the initial draft decision of $38.39 per month released in December 2014. The current price of $34.44 per month was established by international benchmarking at the end of 2013 and came into effect on 1 December 2014.

Prior to 1 December 2014, Chorus was able to charge $44.98 per month for its wholesale broadband service. Tables detailing the UCLL and UBA price components proposed for the next five years and set during this process are included in the background below.

Telecommunications Commissioner Dr Stephen Gale said the Commission had taken full account of all the submissions it had received on the December 2014 draft decision, as reflected in the 1400 pages released for consultation today.

“The modelled price released today is very similar to the draft we released in December and continues to reflect that New Zealand’s local loop network is unique when compared to overseas benchmarks. We have done further analysis on why this is, and it’s clear that our dispersed population is a significant cost factor,” Dr Gale said.

“Simplistic comparisons of international wholesale broadband prices do not tell the true story. New Zealand’s average cable length per connection is 64 metres. That is 13 metres more than in Sweden, the nation that most closely resembles our own, and 23 metres more than in France.

“Our civil engineering costs are also comparatively high. Physically digging and laying the network makes up nearly half New Zealand’s monthly wholesale broadband price alone.”

The Commission has released a report from consultants TERA that further details New Zealand’s costs of constructing the copper network compared to other nations. A copy of this report can be found here.

“We now propose not to backdate the UBA and UCLL prices, so once finalised, the prices are likely to come into effect on release of the final determinations in December 2015. Our revised majority view is that backdating will not promote competition for the long-term benefit of end users. However, we are still seeking views from submitters on whether they believe the final prices should be backdated, and if so, what would be an appropriate date for this,” Dr Gale said.

The Commission is welcoming submissions from interested parties on both draft decisions. Submissions are due by Thursday 13 August 2015.

The further draft decisions can be found on the Commission’s website.

An Infographic detailing the cost breakdown of the proposed total price can be foundhere.

ENDS

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