Analyst sees drop in service from Chorus

An EY (Ernst & Young) report into Chorus has warned the payoff for changes to cover a funding shortfall include a drop in services, high prices for new connections, network congestion and an increase in faults on the network, prompting Telecom to express concern about the erosion of services for consumers.

Communications Minister Amy Adams released the EY report on Saturday, including proposals to try to address the estimated $1 billion shortfall resulting from the Commerce Commission pricing decision on copper-based broadband services.

The report said measures could be taken to reduce that shortfall to about $250 million, including a package of operations and capital savings proposed by Chorus. It listed the risks of Chorus' proposals, including lower service levels, more unhappy customers, congestion on networks, and new customers being charged the full costs for installing new connections.

Andrew Pirie, Telecom's general manager of corporate relations, said yesterday that Chorus should find a way to resolve its funding issues without eroding the current network and service levels.

"Actions such as these will penalise many consumers and businesses and represent a degrading of the high quality telecommunications infrastructure enjoyed today by New Zealanders."

Telecommunications Users Association head Paul Brislen said the proposed remedies were "pretty dire" and Chorus would be better to try other options given. He said increasing prices on goods or services that were not regulated to try to compensate for those that were could invite Commerce Commission attention.

"There are a lot of other things Chorus can do to bring in more money. Screwing over the customers is the last thing Chorus needs to do at this point."

Ms Adams said that in most areas Chorus already had to meet certain regulated standards of service set by the Commerce Commission.

"Chorus has also advised me that it will seek to limit any reduction in quality of service that may result from any cost savings."

Chorus acknowledged cost-saving measures could carry a cost to consumers, which it was weighing up carefully to ensure it struck the right balance.

The Government's Crown Fibre Holdings is now in talks with Chorus about its contract and how to close the rest of the funding shortfall. Ms Adams has made it clear she expects Chorus to meet "a significant part" of the shortfall itself and for Crown Fibre Holdings to stick to its $1.35 billion fiscal cap.