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Chorus says telecommunications amendments don't go far enough, could stifle innovation

Friday 4th May 2018

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Chorus says a select committee report on changes to the regulatory framework for the telecommunications industry doesn't go far enough, and could unfairly restrict the prices it can charge and stifle innovation.


A report from the economic development, science and innovation committee on the Telecommunications (New Regulatory Framework) Amendment Bill, published today, covers the establishment of a new regulatory framework for fibre services, and the involvement of the government and the Commerce Commission in regulating activity and prices.


One of Chorus's major concerns is on the report's recommendations for pricing of "anchor services" - something which ensures consumers can access a voice service and basic broadband at reasonable prices, which anchors the price and quality of other fibre services. 


The report says some of the 257 submitters on the bill were concerned about consumers facing price shocks, but the committee understood that the government is considering an amendment to the bill to create a maximum price based on the price path which Chorus published in 2014 when it launched fibre. 


In a statement to the NZX, Chorus chief executive Kate McKenzie said that price path "unfairly restricts our ability to recover costs and would require us to price below local fibre companies."


Chorus' other stated concern was on business line restrictions. The committee recommended maintaining a prohibition on Chorus being involved in retail activities, lest it distort competition and innovation, but giving the Commerce Commission the ability to provide exemptions for particular services on a case-by-case basis after the first regulatory period.


McKenzie said the recommended exemption power was welcome, but didn't go far enough and could suppress innovation.


"The ability to innovate is vital if we are to close the digital divide and meet the work and productivity challenges of the digital age," McKenzie said. "So we’ll work with the government during the remaining stages of the bill’s passage to help ensure the final framework doesn’t stifle innovation and reflects our partnership with the government."


The report proposes a number of other changes, including:


- recommending the input methodologies for government funding of fibre be specified, so UFB providers, like Chorus, would be able to recover the costs incurred from building the network through future revenues or prices, but the ComCom should be required to ensure costs aren't over-recovered and recovery is limited to actual costs;


- changing the definition of telecommunications to include broadcasting transmission services, which the report says means "some entities" might need to pay industry levies, though it wouldn't cover content and aggregation services, and amending the definition of fibre network to ensure the network is regulated as intended;


- deregulating copper fixed line access services in areas where fibre fixed line access services are available, with consumer protection when copper is withdrawn;


- extending the range of the Commerce Commission’s work that could be funded from levies; and


- mandating the Commerce Commission to consider all end users’ interests, not just the interests of fibre users.


McKenzie said Chorus would look carefully at recommended changes to the treatment of Crown financing arrangements, which is part of its agreement to build the ultra-fast broadband network.


Listed telco Spark was less concerned in a statement published to the NZX.


"Spark will be reviewing the report in depth, but our initial assessment is that we do not expect any of these recommended changes to have a significant effect on Spark’s operations," the company said. "In its recommended changes, the select committee has addressed a number of the concerns Spark raised over the draft bill."



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