Communications Minister Amy Adams doesn't expect the Government will need to invest any more than the $1.35 billion already committed to the ultra-fast broadband schemes as an independent probe indicates the Chorus' leg of the project would be at risk if changes aren't made.

Adams said this morning she had been given an initial report from consultants Ernst & Young Australia, which the Government commissioned to look into whether Chorus could deliver on its broadband contracts if Commerce Commission cuts to internet pricing came into effect.

These prices - which the regulator said should be cut by 23 per cent - concern what Chorus charges internet retailers like Vodafone or Orcon for access and services over the copper network.

The preliminary conclusion from Ernst & Young was that copper price changes will have a significant impact on Chorus' financial position.


Without further action, Chorus was at risk of not meeting its UFB and RBI contractual commitments, Adams said.

Chorus is one of the four private companies building the UFB network, which is partially taxpayer-funded.

When the Commerce Commission announced the price cut last month, Chorus claimed the decision would lead to a $1 billion funding shortfall. Adams said Ernst & Young had indicated that even if Chorus had made changes within its business, the Crown would need to act to keep the UFB project out of danger.

"If the Crown did nothing there is a risk [to UFB], the Crown has to do something," she said during a media briefing.

Adams said she still expected Chorus to meet "a significant part" of the funding shortfall itself and expected the company to meet with Crown Fibre Holdings to talk about any changes which could be made to UFB contracts.

CFH is the body in charge of the Government's $1.35 billion investment in UFB.

"The first step we will have to do is get Crown Fibre Holdings to talk with Chorus about the changes that could be made within the contract, that aren't going to affect [UFB] build footprint or build time, and come back to us to see if they can find a way through on that basis," Adams said.

Asked what changes CFH and Chorus could make, Adam said:

"There's a number of options they could look at...for example, the timing of payments [to Chorus], the structuring of payments, some of the specifics of the build requirements which don't affect service provision or timeframe," she said.

Adams said CFH was still required to work within its "fiscal envelope" for the UFB project of $1.35 billion.

She said at this stage she didn't anticipate CFH needing to come back to the Government and ask for more Crown funds.

The size of Chorus' shortfall was still being finalised and would be outlined in Ernst and Young's final report, due next week.

Chorus chief executive Mark Ratcliffe has issued a short statement this morning saying: "We remain 100 per cent committed to the UFB and RBI initiatives, and working to find a solution to the issues as quickly as possible."

"As the Crown's cornerstone partner in a large public private partnership we will engage immediately with Crown Fibre Holdings with regard to opportunities within the contract.

"We look forward to resolving these issues and continuing to focus on this world-leading fibre infrastructure build."

Chorus shares are trading at $1.405 a piece, down 2.09 per cent on yesterday's close. The company's share price has tumbled around 50 per cent in the last year.

The Coalition for Fair Internet Pricing, a lobby group which campaigned against the Government overriding the Commerce Commission on copper prices, asked today to meet with Adams over the issues with UFB.

It wants to discuss "what constructive role it can play to help support the building and take up," of UFB.

The Government has no stronger supporter of its UFB initiative than the Coalition for Fair Internet Pricing and we represent a very wide cross section of Kiwis with an interest in its successful roll out," spokeswoman for the coalition Sue Chetwin said today.

"Now that parliament has decided not to proceed with a copper tax, we want to do all we can to help get UFB built as fast, as cheaply and as comprehensively as possible so that all Kiwi households and businesses can benefit from it,"

"It would be useful to meet with the minister and EY Australia as soon as possible to learn of its preliminary conclusions and we also urge the minister to release the draft EY work as soon as possible," she said.

"Transparency is vital to achieve broad public and industry support for the next steps that have to be taken to fast-track the UFB. The UFB is just too important to get wrong."

Read more:
Chorus takes Commerce Commission to High Court
Broadband blow-up: Chorus talks 'default event'

Broadband price cut 'misguided' says angry investor
Liam Dann: Govt broadband dithering fuels Chorus slump
Editorial: Govt must bite the bullet on copper pricing

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