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Telecom unbundling key to regulator's copper conundrum

Tuesday 13th August 2013

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Telecom Corp's dominance in the country's retail broadband market and how it chooses to unbundle services on Chorus' ageing copper network are central to the conundrum facing the Commerce Commission.

The regulator has backed away from imposing a sharp cut to the regulated price Chorus can charge wholesale customers for access to the copper lines, and has released another paper on the issue for feedback. Telecommunications Commissioner Stephen Gale is trying to juggle the competing interests of consumers wanting cheap services against protecting the government-funded build of a nationwide fibre network.

The regulator is now proposing a more modest price cut to the regulated price of unbundled bitstream access services over the copper lines, tweaking the benchmark price points and increasing the median price 11 percent to $9.91 compared to its original draft determination.

"Our current view is that taking account of dynamic efficiencies, a UBA price above the median will best promote competition for the LTBEU (long-term benefit of end-users)," the paper said.

While that would be good in theory for Chorus, which faces the regulated price, Telecommunications Minister Amy Adams last week launched a new way forward to bridge the copper-fibre gap, with several options that would set all components of the wholesale prices for copper services at between $37.50 and $42.50 a month to give the newer technology a leg-up over its ageing copper rival.

Further complicating matters is the role Telecom has as a retail provider in encouraging end-users, having shed its regulatory burden when it carved out Chorus in 2011. The Commerce Commission sees the higher price point for copper services as something that might encourage Telecom to promote unbundling competition, but that might be at odds with migrating customers on to fibre products.

"We consider that the major process by which competition on the copper network could be promoted by the current UBA price decision is if Telecom is induced to unbundle a greater number of exchanges," the paper said.

The uncertainty lies in whether Telecom will choose to cash in on the cost savings from a higher UBA price and unbundle widely, or if it "decides that a rapid migration of end-users to the UFB (ultrafast broadband) is its best competitive strategy."

The Commerce Commission sees retail prices of copper and fibre services as the major influence to whether end-consumer will migrate onto the newer technology, though it concedes the UBA price will impact on demand to an uncertain extent.

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