Hamish Fletcher

Hamish Fletcher is a business reporter for the NZ Herald

Telecom backs Govt broadband intervention

Contractors laying fibre optic cable as part of the nationwide ultra fast broadband rollout.
Contractors laying fibre optic cable as part of the nationwide ultra fast broadband rollout.

Telecom supports intervention in the copper broadband market if the Government believes there is enough evidence the rollout of its $1.5 billion ultra-fast broadband network is in danger.

"Ongoing debates about copper pricing risk distracting our industry, and customers, from the far more important questions of how, as a country, we can best take advantage of the very valuable fibre assets we are investing in," Telecom said in a submission on the issue to the Government.

The tussle over copper phone lines regulation flared recently with the launch of a campaign by Coalition for Fair Internet Pricing, which argued proposed Government intervention would effectively put a new tax on broadband consumers and was sidelining the Commerce Commission.

Telecom said in its submission to the Government, released publicly this morning, that there was uncertainty over how the Commerce Commission's regulation of copper prices would impact Chorus's ability to complete the UFB rollout.

Chorus - which split from Telecom in 2011 - is responsible for about 70 per cent of the UFB deployment.

The company said last year that the Commerce Commission's proposal to cut wholesale copper prices by $12 could shave $150 million to $160 million off its pre-tax earnings.

Chorus complained if copper pricing was pitched too low, it would kill customer appetite for fibre services being rolled out as part of the UFB programme.

The Government signalled it would intervene and in February fast-tracked a review of telecommunications law.

As part of this review, Communications and IT Minister Amy Adams issued a discussion document proposing setting Chorus' wholesale charge for copper line services between $37.50 and $42.50 a month - the same price as faster fibre services.

This is up to $10 higher than the Commerce Commission's proposal.

Telecom in its submission on the discussion document said the "overarching priority" is to ensure the UFB rollout is completed.

"If the Government considers there is sufficient evidence to suggest this may not occur, then we support pre-emptive action to address that concern," New Zealand's biggest phone and internet retailer said.

The company supports setting wholesale copper charges at $37.50 - which would mean the largest price drop for consumers, it said.

"Telecom is not interested in getting bogged down in regulatory processes and simply wants certainty so we can ensure our customers have access to the best products and services, using the most appropriate technologies, in the most efficient and cost-effective way possible," Telecom chief executive Simon Moutter said.

"The $37.50 price sits at the bottom end of the Government proposed range of options and will quickly deliver savings to consumers, is a fair wholesale price and delivered on Government's goals for the UFB rollout. We've argued it should be adopted as part of the current review," Moutter said.

Telecom's position is poles apart with is biggest rival, Vodafone.

Vodafone last week said Government intervention in the copper market was "corporate welfare".

"This intervention is quite simply a stealth copper tax on all consumers with no justification," Vodafone's submissions said.

"There is no evidence to suggest UFB objectives are at risk. This proposal acts on a whim to deliver unnecessary corporate welfare to Chorus, at expense of all consumers who will pay more for telecommunications services," Vodafone said.

Broadband prices

Why are people arguing over copper?

Despite the construction of the Government's new fibre optic Ultrafast Broadband (UFB) network, most New Zealanders still access the internet via old copper telephone wires.

How is the price set?

Because former Telecom division Chorus has a monopoly over the copper network, the prices it can charge are set by the Commerce Commission. It has recommended cutting the price Chorus charges its competitors and ultimately their customers by about a quarter, or $12.50 a month.

Cheaper broadband - that's a good thing isn't it?

The Government is concerned that if the price is too low and means customers will keep using copper rather than the UFB network, it puts the main operator, Chorus, at risk of failure.

How has the Government responded?

In a recent discussion document it recommends a far smaller cut. So broadband prices will fall, but less than under the Commerce Commission's proposal. The Coalition for Fair internet Pricing says the difference is about $600 million over six years.

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