Government policy U-turn good for Chorus shareholders, bad for consumers

07 Aug 2013

InternetNZ (Internet New Zealand Inc) says "Chorus shareholders will be the winners from the proposals outlined in today’s discussion paper. Consumers will be the losers."

InternetNZ Chief Executive Jordan Carter made the comment in response to today's release by Hon Amy Adams of a discussion document on the review of the Telecommunications Act 2001. 

“The underlying policy tension is concern about the prospects for the Ultra-fast Broadband Initiative’s success. The UFB was designed with a simple policy framework in mind: a fibre network overbuilding and competing with the existing copper network,” Carter says.  

"The UFB rollout of fibre broadband is guaranteed by the contracts signed in setting it up. Relative prices between fibre and copper don't affect the obligations on Chorus and others to roll out the UFB on time and to schedule. Nothing in the discussion document says why any of the fibre network providers need more money to complete the UFB, yet the effect of today's discussion paper is to deliver money out of consumers' pockets and into Chorus's bottom line. 

"Options for copper pricing in the discussion document would all boost prices higher than what is likely under today's regulatory regime. The argument for doing so - that copper prices should match fibre prices - simply does not stand up to scrutiny. The argument would only apply if the government's policy changed so that the fibre network was replacing the copper network rather than competing with it. 

“If that fundamental policy has changed, the discussion document doesn’t acknowledge it.

Attempting to give the illusion of competition while effectively cross-subsidising fibre from copper is a recipe for disaster that will only benefit Chorus shareholders at the expense of copper customers. 

"Further, the document suggests prices for fibre broadband were set by commercial negotiation between the Crown and providers in return for a $1.35bn investment. The prices don't reflect the cost of fibre broadband services. They reflect a commercial deal.

"To match copper pricing - a totally different technology which is already built - with those fibre prices beggars belief. Logic says the cost of copper broadband should be based on what *copper* costs - not what a different technology costs.

A wide range of matters are canvassed in the 77 page discussion document, but the main focus is on copper pricing matters.

"We will be analysing the detail of the proposals set out in the discussion document and commenting further in the coming days. A wider debate needs to kick off about whether the focus is right; the principles set out are carried through into the options; whether there are other items that should be dealt with in phase one.

"InternetNZ will convene forums for all those interested to discuss the options set out. A well-informed set of submissions will help the Government design the best possible legislation. 

"For now, the story is that the proposals the document sets out will see most broadband users paying higher prices than they need to," Jordan Carter says.



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