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Clare Curran: Unanswered questions about Chorus

Unanswered questions about Chorus

by Clare Curran
December 9th, 2013

As the Chorus debacle rolls on and the government’s role in its instability remains under scrutiny, the list of unanswered questions grows longer into how this situation has unfolded.

Questions to the Minister, to her ministry and to Chorus itself which if answered may provide illumination on how this train wreck of a situation has come to be.

I put some of these questions to MBIE last week in the Commerce Select Committee. The answers were less than satisfactory and in some cases highly questionable. The current Minister Amy Adams, her predecessor and architect of the Chorus contract and the UFB Steven Joyce and even the Prime Minister continue to duck and dive accountability, using diversionary and reactive tactics as they try to come up with ways to keep the UFB on track and save Chorus’s bacon and their own hide.

1. Did MBIE (or it’s consultants or CFH) in 2011 calculate the likely copper price under a cost based pricing principle – if not why not? Their own legislation created a 3 year moratorium (or regulatory holiday) on changes to copper prices.

• What was that price or range of prices? Did they share that info with Chorus- why/why not? Did they also do calculations on the impact of averaging and the 2 year price freeze – did they share that info with Chorus – why/why not.
• What advice went to Cabinet on this? Steven Joyce’s 23011 legislative changes to the Telco Act inserted the requirement for a move to cost-plus pricing of copper giving a three year window. What advice was provided on the impact of this change? Last Thursday MBIE officials told us in the select committee that there was some advice that copper would drop “a little bit”. How was that advice developed? And how much is “a little bit”?
• What advice was provided to the Minister from Treasury re copper pricing/fibre. Did MBIE seek any advice from Treasury? Did the Minister? Did they offer any?

You would have thought that MBIE would have to have done the numbers on cost based copper – that the UFB could not have been negotiated without them! Otherwise why did the govt give a three year moratorium if it wasn’t to offset the impact of cost based copper – why wasn’t it a one year or four year moratorium – there must have been some calculations on which to base such a major decision!

2: Did any MBIE officials (including Bruce Parkes) participate in any discussions with Chorus or Mark Ratcliffe relating to the move to cost based pricing? Was the impact on Chorus discussed and what the moratorium and averaging would do in compensation? Was there a negotiation where these things were agreed. Was there anything in verbal discussions that could possibly have been construed by Ratcliffe as the govt or officials saying that they would look after Chorus if the copper price ended up lower than they anticipated?

• If Bruce Parkes participated in any of these discussions was he conflicted in the sense that he was previously a senior manager in Telecom and colleague of Ratcliffe?
• Now that Bruce Parkes has shifted out of MBIE into DPMC, what role is he playing advising the government on these matters?

3: Re Amy Adams discussion document which is now the subject of a legal challenge by smaller Telco CallPlus – where in that discussion document are all or any of the non legislative options that the PM says are there but nobody else can find? Isn’t it the case that the discussion document only proposes options all of which require legislation?

• Was MBIE directed by the Minister to include only legislative options in the discussion document, if not why did they not include other options as requested by industry and users?
• Why does the Discussion Document not follow Treasury regulatory principles?
• Now that legislation to increase copper prices is off the table, will MBIE be recommending to the Minister that the Discussion Document be pulled? (They say no, but I want that in writing from them)
• Does MBIE acknowledge that the section 157AA review is fundamentally flawed, and will it withdraw the discussion document and conduct a new section 157AA review once the UFB is in place;

4. Re passing on costs of cheaper copper to consumers. Has MBIE advised the Minister on price pass throughs from RSPs, especially in light of both Orcon and Call Plus saying that will pass price cuts on? Is MBIE and the Minister aware that CallPlus and Orcon have both said they will pass on the savings from a fall in copper prices to consumers. Why does she deny this?

• Has MBIE had direct discussions with RSPs on this?

5. Re the Ernst & Young report? Will the report released publicly contain the same information as the verbal report provided to the Minister? If not why not? How will the public be able to judge whether it is a rigorous analysis?

6. When Steven Joyce signed off the deal between Chorus and Crown Fibre Holdings for the $1 billion contract for UFB was he aware that no sub contract deals had been signed and therefore no prices agreed to between Chorus and the sub-contractors including Visionstream, Transfield and Downs to rollout UFB.

• What material impact have those subcontract deals made to Chorus’s financial position and should Crown Fibre Holdings have ensured that information was locked in before the contract was signed?

7. What advice has MBIE provided to the Minister on how the potential renegotiation of the Chorus contract is fair to other ultra-fast broadband contractors who are fulfilling their contractual obligations without the need for corporate welfare?

• Has MBIE provided the Minister with any advice on legal issues which may arise should the contract with Chorus be further varied to provide Chorus with a better deal than that with the three local fibre companies which are quietly getting on with the job of rolling out UFB.

These are just some of the questions which need answers. Feel free to offer more in comments.

ENDS

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