Vibrant fibre market more important than low prices, Adams says

Friday 8th February 2013

The lowest price of broadband internet access is less important than ensuring consumers move as quickly as possible to high-speed fibre-based services, says Telecommunications Minister Amy Adams.

"I don't think the over-arching criteria in this is 'what is the cheapest option'," Adams told BusinessDesk. "If that was the case, we'd be sticking with dial-up. I don't think you'd find any consumer saying 'if dial-up's cheaper, let me have that'."

Her comments followed her announcement the government would accelerate its timetable for reviewing the regulatory regime for telecommunications services. The decision effectively neuters the Commerce Commission, which issued a draft determination late last year that could favour a longer life for the existing copper wire network by pricing it highly competitively with new fibre services.

That draft determination, which Adams described as a "curve ball", sparked protest from the key players in the ultra-fast broadband roll-out, including NZX-listed Chorus, whose share price recovered 12 percent today, immediately following Adams's announcement.

The government is subsidising a national roll-out of UFB and had already signalled it saw the commission's draft determination as "problematic."

"Carrying on the way it was would have changed the landscape in the way telecommunications services were priced and delivered and we saw some real risks around that in terms of market uncertainty and the market not looking to develop and promote high speed fibre products," said Adams.

"What became very clear is that this sort of uncertainty and decisions coming out that have really taken everyone by surprise are the last thing that anyone needs in this space.

"The legislation always provided that he (Telecommunications Commissioner Stephen Gale) would be superceded" in 2014, said Adams. "The question was whether we had this ongoing period of uncertainty and constantly changing rules.

"Given that where he has gone has been a bit of a curve ball for most people in the industry, we've said the time is right now to bring this forward and have a comprehensive look now."

Adams stressed she did not necessarily agree that UFB prices would be higher as a result of the government's intervention, but argued price was not the only factor to take into account in pursuing a policy to improve New Zealand's internet speeds.

"It's not a simple matter of saying 'if the wholesale price is low for the next 12 months, that's a good thing' because as I think what everyone knows is that what consumers end up paying is a factor of a whole lot of other things, chief amongst which is a competitive market in which everyone's in competing for that business," Adams said.

"The over-arching consideration is what is the best long term interests of telecommunications users and certainly when we have the debate about the government's commitment to UFB programmes, we got a very clear message from consumers: we need to move to fibre.

"In any sector, you can't look at one component part without factoring in the cost of moving to new technology. While of course we want to ensure that consumers are paying fair prices and no more than is necessary, it isn't about the cheapest way of connecting."

The government and commission reviews would not necessarily reach different conclusions and Adams said the commission process would continue on its own path while the government review occurred.

"I'm not interfering in his process," she said.

"Now the two are in parallel. He has his process and that's for him to work through and determine how he wants to handle that, but what we need is a much clearer, long term provision around how regulation of telecommunication services work as a whole rather than in disparate parts."

BusinessDesk.co.nz

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