Holly Ryan: Spark swipe reignites price row

The decision on network access pricing affects the cost of internet services.

Spark yesterday reignited the copper pricing debate, hitting out at the Commerce Commission and Chorus after the commission set its draft price at a cost that Spark says is unreasonably high.

There has been strong debate on the subject because the end price the commission sets will partly determine how much all New Zealanders pay for their internet, as well as affecting the industry's finances.

Any change in consumer pricing is also likely to be fast and decisive - Spark was quick to warn it would have to increase charges when draft pricing higher than it was expecting was announced in December.

The main point that has come out of yesterday's debate is that there is still a long way to go in solving the copper pricing problem.

After the division of Chorus and Spark into two companies, the commission was put in the unenviable position of having to set a price for the copper network that was high enough for Chorus (which has a monopoly on the copper network) and low enough for internet providers such as Spark.

Initially the commission benchmarked a price by looking at two Scandinavian countries that it deemed most similar to New Zealand in geography, population spread and internet standard.

The resulting benchmarked price was soundly rejected by most industry players - including Spark and Chorus.

It seems that the latest plan is not satisfactory either. Spark's submission highlighted several issues of concern, not least from data suggesting the commission might have overestimated the cost of providing broadband by as much as 60 to 80 per cent.

In December, telecommunications commissioner Stephen Gale said several factors made New Zealand unique and were likely to push pricing up.

If Spark's data is correct, this would mean New Zealand is one of the world's most expensive places to get internet - which raises the question, is the commission wrong or is New Zealand so different from other countries that setting pricing at up to 80 per cent higher is reasonable?

Digging below the surface arguments, it would be disingenuous not to note that although the proposed commission price is higher than it is now, it is still lower than the price from a few months ago, before the new benchmarked pricing was implemented.

The other issue is that having pushed back its deadline, the commission is under pressure to make a decision and provide some certainty for the market.

But on the other side of the debate, industry and consumer groups are saying the commission has rushed its calculations and that there could be errors.

Regardless of what happens, it is difficult to see an outcome that will make both sides completelyhappy.