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New Zealand’s Fiber Policy Hits a Snag

New Zealand’s Fiber Policy Hits a Snag

Recently, New Zealand Commerce Commission (the "ComCom") finalized an access determination for copper-based unbundled bitstream access (UBA) services, cutting prices for a basic UBA service by 23 percent.

David Kennedy, Research Director, Telecoms Asia Pacific, Ovum comments:

“The regulator's recent pricing decisions significantly affect Chorus' revenue base and investment capacity after 2014, and will also make fiber relatively unattractive to end users.

In Ovum's view, the impact of the UBA decision will reach beyond Chorus. Coupled with the cut to ULLS pricing, ComCom's decision will affect takeup of fiber by making copper relatively more attractive to both end users and to the retail ISPs who supply them. Chorus and the other UFB investors are structurally separated and so are dependent on these ISPs to promote fiber to end-users. The ISPs now have less incentive to do so.

The Ernst & Young report confirms the current NZ$1b funding gap, and it proposes a range of changes within the current framework to address this, particularly price increases on unregulated products and quality reductions to reduce costs. It is naive to think that such a large shortfall will be borne by shareholders alone. Much of the shortfall can be addressed, but it is becoming clearer that this will come at a price to users.

However, the fundamental problem remains unaddressed by this report. The tensions in the New Zealand telecommunications policy framework will persist as long as New Zealand has two access networks, FTTN and UFB, operating in parallel. Apart from the pricing problems, New Zealand telecommunications would operate much more efficiently if demand were consolidated onto one fixed access network. Policy currently envisages a gradual, organic migration to fiber, but at some point the FTTN network must be shut down in the UFB footprint.

If the Government remains committed to the UFB program, then migration should not be left to chance. A migration timetable, with scheduled shutdown of FTTN where UFB is established after a reasonable transition period, is the logical extension of the Government's commitment to UFB.”

ENDS

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