Surf's up: Higher data caps, lower broadband bills on way

With internet companies paying less for copper-based service, consumers should benefit when the price cuts take effect in December next year. Photo / Thinkstock

Cheaper prices and more data on way after Government left powerless to intervene

New Zealanders can look forward to cheaper broadband - or at least more downloads for their money - after the National Government was yesterday left with no mates in Parliament to support its proposal to override price cuts recommended by the Commerce Commission.

Consumer groups pushing for the 23 per cent cut in wholesale prices claimed victory after all other parties in Parliament, including Government support partners the Maori Party, United Future, and Act, said they would not support any legislation to overrule the commission's recommendation.

The Government raised the possibility of legislative intervention to override the commission in an August discussion document in response to the commission's initial recommendation of a big cut to the wholesale charges retail internet service providers (ISPs) pay to network company Chorus to use its copper-wire network.

The Government said making copper prices too cheap would jeopardise the roll-out of the new fibre-based Ultrafast Broadband (UFB) network. It would undermine incentives for internet companies and consumers to move to the new service and would reduce the revenue Chorus received from copper, which it was using to partly fund the construction of the new network.

But the announcements mean the Government does not have the numbers in Parliament to pass legislation to impose a smaller than recommended cut.

Telecommunications Users Association chief executive Paul Brislen said the Government had no other options to override the commission's decision.

The commission's final recommendation of a 23 per cent cut was still subject to a final pricing review, but he believed that was unlikely to have much effect.

With internet companies paying less for copper-based service, consumers should benefit when the price cuts take effect in December next year.

"What it should mean is you'll either get cheaper broadband or more broadband for your money," Mr Brislen said.

Labour leader David Cunliffe said: "Kiwi households will get the average $120 a year reduction in their phone bills for copper broadband the Commerce Commission has said they deserve."

Communications and Information Technology Minister Amy Adams downplayed the significance of losing the option of intervention on copper prices, saying that was never the Government's first option to ensure Chorus could meet its obligations under its UFB contracts.

The first priority was for Chorus to deal with the funding shortfall itself.

The Government is waiting for an independent review, expected next month, of Chorus' finances to establish whether its claims that it can't afford to fund its UFB roll-out with reduced copper revenue ring true.

If it supported Chorus' view, then the Government would look at other options, including varying the terms of the company's UFB contract, changing the basis under which Chorus received taxpayer funding for UFB, or even "step in" options where the Government could take over some of Chorus' operations.

Consumer bonus

• The Commerce Commission has recommended cutting wholesale copper-based broadband prices from $44.98 a month per consumer to $34.44.

• The cut is scheduled to take effect in December next year.

• Internet service providers Orcon and Slingshot have promised to pass on savings to consumers.

• Taking into account other factors, Orcon says its monthly price should fall by about $7.50.

• The Telecommunications Users Association says consumers may see larger data caps rather than lower prices.