Chorus cuts some broadband prices - ISPs on whether they'll pass on the savings

"When Covid -19 hit, we removed data caps until the end of June. We've seen a significant increase in usage for no additional revenue in recent months," says 2degrees Mat Bolland. Photo / File

Chorus - which operates the lion's share of the Ultrafast broadband (UFB) fibre network - says it has cut wholesale pricing on key plans.

It has also chipped in $2m for retail internet service providers like Spark, Vodafone, 2degrees and Vocus (owner of Orcon and Slingshot) who pledged not to cut-off customers over late payments during the lockdowns - and who earlier called on Chorus to help them out with an anticipated "wall of bad debt."

Chorus said today that:

• Gigabit wholesale fibre pricing will reduce from $60 a month to $56 a month from July 1. Chorus says Gigabit plans are the most popular with new UFB customers

• Small business wholesale fibre pricing will reduce by $3 a month to $52 by July 1

• The most popular type of UFB plan - a 100 megabit connection - gets no price cut.
A $46 to $47 a month wholesale price increase, to keep pace with inflation, has been delayed until October 1, as previously flagged

Chorus chief executive JB Rousselot said the decision on whether to pass on the price cuts sat with retail ISPs.

But don't look for your monthly internet bill to go down, whichever provider you're with.

Retailers told the 'Herald' they expect bad debts to far exceed the $2m chipped in by Chorus, or the value of its wholesale price cuts and delay on price increases - which Chorus says will be worth a collective $10m to ISPs.

Another common theme: A competitive retail market has meant ISPs have cut prices on many plans, or held retail pricing as Chorus raised wholesale charges last year - so ISPs are due a catchup.

And in the case of Spark, Vodafone and 2degrees, they also have a $114m hole in their pocket with the loss of global roaming revenue with borders mostly closed, plus expenses associated with offering all fixed-line customers unlimited data during the lockdown.

Another theme raised by all retailers: they still don't know how bad things will get, and how much cushioning they'll need.

'Artisan bread' cuts when 'white bread' cuts needed

A spokeswoman for Vodafone added that Chorus' cuts weren't as generous as they looked.

"The majority of our customers are on the most popular 'white bread' fibre plan [the 100Mbit service], which has no price cut and a wholesale cost set to go up from October 1, yet Chorus appears to be highlighting discounts on an 'artisan sourdough' [gigabit] plan which is much less popular.

"So unfortunately, this doesn't help the customers who are most in need right now.

"Vodafone and our customers will see limited financial benefit from today's announcement, which will add additional cost-pressures to New Zealanders and their businesses."

Chorus boss JB Rousselot says the decision on whether to pass on the price cuts sits with retail ISPs. The retailers say they've already made cuts and that Chorus needs to chip in more. Photo / File

Chorus says that gigabit plans are the most popular service with customers.

Vodafone counters that 100Mbit/s plans, which get no price cut, are the most popular overall. 2degrees and Spark say the same.

"The large majority of our customers use the products that will increase in price from October. Any Chorus price increases will inevitably flow through to customers, many of whom will be facing hardship over the next six to 12 months," a Spark spokeswoman said.

"So the longer Chorus can hold off on any price increase the better."

Vodafone: scrap 100 megabit price rise altogether

Vodafone also questioned if the October wholesale price rise for the mainstay 100 megabit plan should go ahead at all.

"Price rises during a global pandemic will place undue pressure on New Zealanders who are relying on digital services to respond and recover from Covid-19, especially when GDP growth is the worst it's been in 27 years and predicted to decrease further."

'impact of recession yet to hit'

2degrees hit a similar note. "Given that most of our customers are on the 100 megabit plan, which will increase in October, we'll look across our base and consider what it means for pricing," corporate affairs chief Mat Bolland said.

"2degrees didn't pass on Chorus cost increases last year and when Covid-19 hit we removed broadband data caps until the end of June. We've seen a significant increase in usage for no additional revenue in recent months.

"Although this is a good start and the lockdown fund will help, the impact of the recession has yet to hit, given that the wage subsidies and mortgage holidays are still in place."

Chorus still more expensive than smaller wholesalers

Vocus NZ consumer GM Taryn Hamilton agreed, saying "We could be seeing impacts for two years plus, with the true extent of the pandemic on the economy unknown."

The Vocus exec did not object to Chorus focus on high-end 1GB plans.

"Across our brands, we connect more than a quarter of the gig market – and gig is where the growth will be in the industry," he said.

Vocus consumer GM Taryn Hamilton: "We could be seeing impacts for two years plus, with the true extent of the pandemic on the economy unknown." Photo / File

But he still had a sharp disagreement with Chorus from another angle.

"Overall, Chorus' gigbit pricing is still higher than Enable and UFF [UFB companies who operate in Christchurch and the central North Island respectively]," Hamilton said.

"This price change was signalled long before Covid and we are a little disappointed that further reductions haven't materialised.

"We made aggressive reductions to our gig pricing last year knowing that a reduction in wholesale price was planned."

The "Covid" reduction was merely repacking of the long-planned cut.

The Herald put Hamilton's comments to Chorus, which declined further comment.