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Chorus warns cheaper access to copper lines may deter fibre buy-in

Friday 4th May 2012

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Chorus, the telecommunications network operator carved out of Telecom last year, is warning that the industry regulator's bias toward cheaper access to the ageing copper lines may discourage buy-in for the fibre network under construction.

In a draft determination, the Commerce Commission indicated it wants to reduce the geographically averaged unbundled copper local loop (UCLL) service to $19.75 a month from its current price of $24.46 over two years.

UCLL lets Chorus's competitors use the copper network between an exchange and an end-customer's premise to offer their own voice and broadband services. The current urban price only has to come down $19.81, and the biggest access gains would be in non-urban areas, which are sitting at $36.63.

Chorus says the draft decision, if ratified, would impact on about 6 percent of its copper-based access services, based on current volumes, and foreshadows more regulator intervention.

"Chorus is disappointed that this creates uncertainty for investors and industry," the company said in a statement. "At a time when New Zealand is making a very significant investment in building a fibre world, Chorus is concerned that the commission's draft decision creates a potential disincentive for retail service providers and end customers to transition to fibre services."

Wholesale prices for access to the copper lines were averaged as a result of legislation enabling Telecom to carve out its Chorus unit last year, something that rankled with rival telecommunications companies who claimed it would lift their costs. The de-averaged urban and non-urban prices are $15.82 and $29.19 respectively, the regulator said.

At the time, Ministry of Economic Development officials downplayed concerns about the impact on copper-line prices, saying it wasn't "deemed significant" and that any increase in UCLL pricing may “have the positive impact of encouraging more investment and innovation on fibre.”

Chorus is holding an investor conference after midday to discuss today's announcement.

The shares fell 1.4 percent to $3.52 in trading yesterday. The stock has gained 20 percent since listing in November last year.

The regulator wants to cut the geographically averaged price after relaxing population density criteria because New Zealanders are spread more thinly around the country than other nations.

The commission is also consulting on whether there are grounds to investigate whether the pricing principles for the unbundled copper low frequency service (UCLFS) should be tweaked. The UCLFS lets telecommunications companies access and connect with the low frequency in Chorus' copper local loop network, which connects an end-user's building to the handover point in the local phone exchange.

The UCLFS price is the same as the UCLL price, though the differences are different. The UCLFS's copper loop has been shortened by as much as the UCLL copper loop, and Chorus may "under-recover forward-looking costs" for the low frequency service, the regulator said.

BusinessDesk.co.nz

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