Business Editor for the NZ Herald

Cheaper internet must wait

Providers reluctant to pass on price cuts forced on Chorus before final decision in April.

Photo / APN
Photo / APN

Internet companies will enjoy a reduction in some of their wholesale costs in December but aren't committed to passing on these savings directly to consumers then.

Cuts to what infrastructure company Chorus charges internet retailers like Vodafone and Orcon for some wholesale copper-line broadband services are due to come into effect on December 1.

While two different price changes made by the Commerce Commission will come in on that day, Chorus has requested a wider review of both sets of prices from the regulator.

Although it had been aiming to have both reviews completed by the time the new pricing came into force, the commission on Thursday said it now planned to have a draft decision on both sets of prices by December and a final decision in April.

This means the price change will be in effect for at least four months before any possible change the commission could make in its final rulings.

But while internet providers will enjoy some lower wholesale costs over this time, none are committing themselves to lower prices for customers straight away in December.

Orcon and Slingshot last November promised to pass on savings from the cuts. Orcon said at the time that the company would cut broadband prices "dollar for dollar", taking into account any extra costs the company faces.

This could be as high as around $7.50 a month for each customer, an Orcon spokesman said last year.

Orcon chief executive Greg McAlister on Friday said there were still some issues to resolve before the company could "get too committed".

These included the possibility the commission could backdate the price decision it reaches in April.

"It's pretty difficult to start putting prices down and then go, 'Sorry, we've got to put them back up again'," McAlister said.

Slingshot last week said it would review pricing when "there is certainty on costs" - which would not be until after April.

Snap chief executive Mark Petrie said Chorus had also announced an unregulated accelerated copper service and the Christchurch-based company needed to consider how that would fit into its "broadband product roadmap".

"With so many moving parts, including the possibility of a clawback scenario with Chorus, it's difficult to say at this stage what our approach will be with respect to the regulated input costs reducing," Petrie said on Friday.

Asked if Vodafone would directly pass on wholesale cuts to consumers, a spokeswoman said: "Given the competition in the retail market, the benefits of any wholesale price reduction ultimately get passed through to consumers".

Responding to the same question, a Telecom spokesman said the company was "confident consumers would get more value".

Outgoing Telecommunications Users' Association chief executive Paul Brislen said internet companies feared they would be stuck with a bill if the commission backdated its Aprildecision.

Given the uncertainty, Brislen thought it was fair enough for internet companies to wait until after April before making price changes.

Price changes from Dec 1

• One is the wholesale monthly price of unbundled copper local loop (UCLL) service.

• Allows telcos to supply voice and broadband services to retail customers using their own equipment over Chorus' local loop.

• The Commerce Commission set the UCLL at a geographic average of $23.52 per month per linedown from $19.08 in urban areas and $35.20 elsewhere.

• The second charge is for a component of copper-line broadband called unbundled bitstream access (UBA), which allows telcos to supply broadband to customers without the need to replicate Chorus' electronics or software.

• This UBA price comes down from $21.46 to $10.92 per line per month.

• The combined price of both UCLL and UBA, due to come into effect on December 1, is $34.44 per line per month - 23 per cent less than now.

- NZ Herald

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