Chorus and copper pricing - the debate

46 comments
Telecommunications users association chief exec Paul Brislen and Chorus chief exec Mark Ratcliffe.
Telecommunications users association chief exec Paul Brislen and Chorus chief exec Mark Ratcliffe.

Paul Brislen - CEO Telecommunications Users Association

For many years New Zealand put up with a telecommunications market place that was broken. It just didn't work.

Telecom ruled the roost, we had limited competition, slow internet speeds and the price of it all was astronomical.

Kiwis were hard done by, to put it mildly. Which is why, in 2001, the role of Telecommunications Commissioner was introduced.

For the first time we had a regulator - with actual legislation to back up the role. Instead of arguing every possible problem through the court system, taking years if not decades, we could get a resolution to a problem in months.

The golden age of the Telecommunications Commissioner looks likely to have been 2006-2012, where decisions were made, industry hotheads calmed and fears assuaged. For six years we had a stable and progressive environment that enabled 2Degrees to launch its mobile service, that saw Telecom kept in check whenever it stepped over the line and where investment in the sector climbed steadily.

That all changed when the Prime Minister said the draft ruling on how much we pay for broadband services was "problematic" and that if push came to shove he'd ignore the Telco Commissioner and just change the law.

The problem the PM wanted to fix is that Chorus was going to earn less from its copper network than the privately-owned monopoly wanted. The Commission had issued a draft price that saw wholesale rates move from $44.98 per line per month to $32.45 per line per month.

The thing is, Chorus knew this was coming. It's known for three years because Steven Joyce had built it into the law. Chorus knew about it because it was spelt out in advice from the ministry on the newly introduced law. Chorus even mentioned it in its own launch prospectus as a risk to the share price.

So great would the drop be that Joyce built in a three year delay to give Chorus time to get its act together.

That didn't happen and instead we now face a situation where the Minister of Communications Amy Adams wants to usurp the role of the Telecommunications Commissioner and decide what the price for broadband should be herself.

She's decided that you should all pay more than the Commerce Commission suggests.

Why? I honestly don't know. Chorus hasn't said it's in danger of not fulfilling its role as builder of the fibre network. Far from it - Chorus has posted a 25.5 cents per share dividend, up from 14.6 cents the year before, and has made a $171m profit for the year.

So what will this extra investment - we calculate it will run to $600m over the rest of the UFB build period - buy for New Zealand?

Nothing. Not a thing.

Chorus won't build the network any faster. It won't be a larger network. It won't be a better network. Chorus will simply build the network it's already been paid nearly over $900m to build.

We don't think that's fair. We think that money rightly belongs to the customers because we've been waiting for a reduction in the price of broadband for at least three years now.

The Coalition for Fair internet Pricing wants two things.

Firstly, we think the right way to regulate a monopoly like Chorus is via the Telecommunications Commissioner, not behind closed doors at the next Cabinet meeting, so we want the government to step aside and let the Commissioner do his job.

And secondly, we think Chorus should just get on and do the job it's been paid to do without asking for any more handouts.


Mark Ratcliffe - Chorus CEO

It's very important to note that the estimates that the Coalition is using in their PR campaign are based on a draft price issued at the start of a long regulatory process.

That price has never been implemented and describing this as a "new tax" is clearly misleading and incorrect.

The issue at hand is deciding the extent to which wholesale prices may decline, at the same time as ensuring that consumers continue to benefit from investment in high quality broadband infrastructure and investors get a fair return. That process is ongoing.

New Zealand is already benefitting from consistently better value for broadband services, as well as faster connections than ever before.

On top of this, the Ultra-fast Broadband initiative is set to deliver one of the highest quality national broadband infrastructures in the world at the same time as further lowering prices for consumers.

New Zealand is about 20 per cent through a once-in-many-generation upgrade to our national broadband infrastructure, which will deliver significant social and economic benefits.

At the same time, the entry level fibre broadband wholesale price is significantly lower than the current copper broadband price, meaning that this initiative will also deliver savings for consumers.

Given the many benefits of this initiative, it is important that the economics of the project remain in place for the Government's partners, that investment is supported throughout the duration of the build and the transition to fibre is supported so consumers get savings and wider benefits.

Have your say

We aim to have healthy debate. But we won't publish comments that abuse others. View commenting guidelines.

1200 characters left

Sort by
  • Oldest

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on red akl_n6 at 02 Sep 2014 03:26:01 Processing Time: 843ms