Regulator set to keep Chorus pricing largely unchanged, not keen on backdating

Thursday 2nd July 2015

The Commerce Commission looks likely to settle on a price close to its original decision on what telecommunications network operator Chorus can charge its customers, though it probably won't backdate any update.

The regulator today released its draft determination for what Chorus can charge on its regulated copper lines in its final pricing principle, a more rigorous process to find the price than the initial pricing principle which relied on international benchmarks. The commission proposes setting the total price Chorus can charge for wholesale broadband services at an average $38.43 per month, largely in line with the $38.39 price established in the benchmarking process which came into effect on Dec. 1.

"The modelled price released today is very similar to the draft we released in December and continues to reflect that New Zealand's local loop network is unique when compared to overseas benchmarks," telecommunications commissioner Stephen Gale said in a statement. "We have done further analysis on this, and it's clear that our dispersed population is a significant cost factor."

Chorus sought the more fulsome review for network pricing after claiming the original decision would force it to cut prices too steeply and put its investment in building a nationwide fibre network at risk.

The commission today said it wasn't "worthwhile for end-users to pay a premium" to mitigate the risks of migrating customers to fibre products "given the benefits are far less certain than for the energy sector where we raised the allowed return on capital."

The regulator today said it proposes not to backdate the wholesale pricing in a split decision, where commissioner Pat Duignan was of the view that retail service providers such as Spark New Zealand should compensate Chorus for the difference in price between the new start date and Dec. 1, 2014.

Gale said he and commissioner Elisabeth Welson didn't think backdating would promote competition for the long term benefit of consumers, though are still seeking submissions on the issue.

Chorus said the impact of the draft decision was largely in line with the previous ruling, though a move to reduce one-off transaction charges could require the company to provide those services below cost.

The company also opposed the proposal not to backdate pricing, saying it was a "significant reversal" on the regulator's previous position.

Chorus shares last traded at $3, and have climbed 13 percent this year.

The regulator is seeking submissions on the draft determination which are due by Aug. 13, and is aiming for a final ruling in December this year.

BusinessDesk.co.nz

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