Chorus wins in push-back against proposed copper pricing

Monday 3rd December 2012

Chorus, the telecommunications network operator, won't have to cut its prices for copper-line services as deeply as initially feared after the antitrust regulator set pricing over the unbundled copper local loop.

The Commerce Commission has set the new geographically averaged price at $23.52 per month per line from Dec. 1, 2014, a 3.9 percent reduction to the prices set in 2007, it said in a statement. That's a smaller cut than the $19.75/month price flag in its draft determination. Urban UCLL prices have been set at $19.08 and rural at $35.20, effective immediately.

The UCLL service lets the telecommunication companies use the copper network between an exchange and an end-customer's premises to offer their own voice and broadband services.

"Following feedback, submissions and a conference in September on this topic, the commission and most parties now agree that there is no clear evidence that the shorter lines cost less and that it is preferable that all lines be priced the same regardless of length," the regulator said. "This is the approach the commission has adopted in its final decision."

The draft determination created uncertainty around Chorus' future, which argued the cheaper pricing regime would be unfair and deter people from buying into the fibre network it's rolling through the country.

Chorus was spun-out from Telecom as a separately-listed company last year to free up the telecommunications company from its regulatory burden and allow the network operator to successfully win a billion dollar subsidy to build a nationwide fibre network and rural broadband system.

Some 80 percent of the network company's revenue is still derived from the ageing copper network, and is subject to a pricing review by the Commerce Commission.

Shares in Chorus climbed 1.8 percent to $3.40 in trading on Friday, and have gained 9 percent this year.

Telecommunications Commissioner Stephen Gale said it was difficult to determine relevant benchmarks with little international evidence, but concluded "the relevant costs in New Zealand are likely to have dropped since 2007."

In a separate statement, the antitrust regulator proposed a full unbundled bitstream access service price at $32.45 per month, effective from Dec. 1, 2014, and will set a final benchmarked price in June after a period of consultation. The price is currently $44.98.

UBA services let telecommunication companies supply broadband services to customers without having to replicate Chorus' electronics or software.

The most significant part of the proposed cut is the reduction in the non-UCLL component, which fell to $8.93 from $21.46 for the basic service.

BusinessDesk.co.nz

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