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Commission Invites Views On Chorus’ Proposed $2 Billion Investment

The Commerce Commission is consulting on Chorus’ proposal to spend $2.1 billion between 2025-2028 – the second period of the new fibre regulatory regime.

Telecommunications Commissioner, Tristan Gilbertson, says the Commission’s focus is on ensuring Chorus continues to invest efficiently ahead of demand in a world-class fibre network for the benefit of New Zealanders.

Mr Gilbertson says the Commission is particularly interested in feedback on proposed expenditure on resilience, given the increasing frequency and severity of extreme weather events, and proposed expenditure on rural network expansion, which are key components of Chorus’ proposed investment in its network.

Chorus is subject to price-quality regulation, which means the Commission sets the maximum revenue it can earn from its customers and the minimum quality standards it must meet. Any expenditure proposed by Chorus and approved by the Commission will help determine the revenue Chorus can recover from retail service providers who use its network to sell broadband services to households and businesses. These costs are ultimately borne by consumers in the retail prices they pay for fibre services.

In its proposal for the second regulatory period, Chorus is seeking approval to invest $1,345 million in capital expenditure and $740 million in operating expenditure on its network.

Mr Gilbertson says the Commission would welcome feedback on areas identified by the independent verifier of Chorus’ proposal, Synergies Economic Consulting. These include demand forecasting, quality standards and incentive payments, and how Chorus’ proposal reflects stakeholder engagement.

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“Stakeholder feedback is an essential source of insight as we consider Chorus’ proposal. Chorus’ investment and our price-quality decisions affect everyone who uses this vital infrastructure now and in the future,” says Mr Gilbertson.

A copy of Chorus’ proposal, the independent verifier’s report and the Commission’s consultation document are available on the Commission’s website.

Submissions can be made through the Commission’s infrastructure regulation mailbox. Submissions close on Thursday, 14 December 2023. The Commission intends to make its draft decision on expenditure in Q1 2024 and its final decision in Q2 2024, before finalising Chorus’ second price-quality path in Q4 2024.

Background
New Zealand’s fibre networks were built by four regulated fibre wholesalers in partnership with the Government under its Ultra-Fast Broadband (UFB) initiative. The other three regulated fibre wholesalers are Enable Networks, Northpower Fibre and Tuatahi First Fibre (previously Ultrafast Fibre).

These networks are now regulated through a price-quality and information disclosure regime, introduced in 2022 following amendments to the Telecommunications Act. The regime has the long-term benefit of telecommunication end-users at its heart.

The Commission set Chorus’ first Price-Quality Path (PQP) for the period from 1 January 2022 on 16 December 2021. On 28 February 2023 it determined the duration of Chorus’ second PQP as four years starting from 1 January 2025. The Commission is required to determine Chorus’ PQP for this second period before 1 January 2025.

In addition to PQP2 for Chorus, in 2024 the Commission is considering whether there are reasonable grounds to conduct a deregulation review. This is a requirement under section 210 of the Telecommunications Act. The Commission intends to release an emerging views paper on this topic mid-December 2023.

The Commission also intends to provide a process update on the anchor services review in Q1 2024.

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