Spark calls for Chorus price rethink

Spark customers are unlikely to recieve any compensation following a service outage yesterday. Photo / File

Spark New Zealand is calling for the Commerce Commission to rethink its prices for access to Chorus' copper network, following advice from international industry spokespeople.

Spark said it was up to the commission to regulate Chorus prices and protect consumers from high charges in monopoly markets. It said the commission's suggested price for landline access was 80 per cent higher than the median price in 14 other comparable countries and 60 per cent higher than the next most expensive country.

General manager of regulatory affairs John Wesley-Smith said there was no reason that the commission should be setting the price so much higher than other countries, and that it needed to consult with industry players and rethink its pricing, or explain why the price was so high.

"This is not because of any New Zealand specific factors - it does not cost 80 per cent more to provide landline access in New Zealand than everywhere else on a like for like basis," Wesley-Smith said. "This is the result of choices made in the draft modelling, and in a number of cases we think there are better choices it could make that avoid this significant divergence from international prices."

However in December, when the commission proposed the new rates, telecommunications commissioner Stephen Gale said there were unique factors in New Zealand that could affect the price, such as New Zealand's copper network having a higher underlying replacement cost because of the number of long lines connecting to small numbers of customers in remote rural areas.

"There appear to be uniquely New Zealand factors, such as the dispersed nature of the rural network, that may differentiate our UCLL prices from the overseas benchmarks," Gale said.

Spark commissioned two international firms to independently review the commission's model, and said both had concluded it had overstated the costs involved by a considerable amount. After adjusting the pricing model, one firm came up with a charge for landline access of $16.64 a month, compared with $28.22 proposed by the commission. The other firm said this charge could be reduced even further if other factors were taken into account.

"With these adjustments the wholesale charges in New Zealand would be much more in line with those applied overseas - and this would translate into lower retail broadband prices than we have today," Wesley-Smith said.

"We are doing everything we can, in what is a fiercely competitive market with about 80 providers, to give New Zealanders more value and keep broadband prices low. Yet the Commission's draft decision will make broadband less affordable for New Zealanders," Wesley-Smith said.

"It also doesn't make sense that the charges for last-century copper broadband are increasing at a time when ultra-fast broadband (UFB) over fibre is being rolled out to three quarters of Zealanders. The Commerce Commission needs to make it clear why any increase in wholesale charges for copper access would be justified," he said.

The commerce commission is expected to set its final pricing later this year.

See the latest Spark release on the issue here: