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No dial tone: ComCom holds firm on proposed copper pricing

By Heather Wright
Thu 2 Jul 2015
FYI, this story is more than a year old

Fifty-two thousand Kiwis may have been opposed to proposed pricing for wholesale access to Chorus' copper network, but the Commerce Commission has held its line, with the latest proposal setting an average price of $38.43 a month.

That figure is a slight increase on the previous proposed pricing, released last December, of $38.39. 

However, in a move that will be welcomed by New Zealand service providers, the Commission has suggested that backdating of the increases should be taken off the table - although that's up for further consultation too.

Today's latest draft decision proposes maximum rental prices that vary slightly over the five year period, but average $27.59 and $10.84 per month for unbundled copper local loop (UCLL) and unbundled bitstream access (UBA) respectively, or $38.43/month.

The previous proposal had been for UCLL of $28.22 and UBA of $10.17.

Industry bodies Tuanz and InternetNZ have both expressed dismay at the new proposed pricing, but applauded moves to take backdating out of the equation.

Tuanz says today's draft decision is 'a disappointingly mixed outcome for users' who will see no benefit in their monthly bills given that the price set for monthly access remains basically unchanged from the previous draft decision.

Tuanz had submitted that it believed the price should be lower than that announced in December 'and therefore lower than announced today'.

"For the significant number of people who will continue to receive their broadband over the coper network over the next five years, and especially those usrs in rural New Zealand who will not have fibre access as part of UFB this announcement dissappointly means no likelihood of reduction in monthly broadband charges," Tuanz chief executive Craig Young says.

Jordan Carter, InternetNZ chief executive, says InternetNZ remains concerned that the prices are too high.

"Throughout this process, we have asked the Commission to justify its decisions and demonstrate its working," Carter says. "We will be analysing today's announcement to confirm that this price is justified." 

Carter says copper broadband prices need to be fair for all partiers. 

"New Zealanders have an interst in the most affordable broadband possible; this needs to be balanced with the need for sufficient returns to justify investment," he says.

Spark too has dubbed the proposed pricing ‘mixed news for consumers’ saying the pricing is still a ‘significant increase’ of $3.97 per month per line this year, with $1.37 of further incremental increases over the following four years. The previous proposal had been for a $4.54 increase per month.

Simon Moutter, Spark New Zealand managing director, says the decision, if finalised, will still mean wholesale line charges in New Zealand are around 70% higher than comparable countries.

However, Telecommunications Commissioner Stephen Gale says New Zealand’s local loop network is ‘unique’ when compared with international benchmarks.

Gale says the Commission has taken full account of all the submissions it received on the December 2014 draft decision, as reflected in the 1400 pages released for consultation today.

More than 52,000 made submissions as part of Spark’s BeCounted web campaign, which enabled Kiwis to easily make a submission against the proposed increases.

“The modeled 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.

“We have done further analysis on why this is, and it’s clear that our dispersed population is a significant cost factor,” he says.

Gale says simplistic comparisons of international wholesale broadband prices to not tell the true story.

“New Zealand’s average cable length per connection is 64m. That is 13m more than Sweden, the nation that most closely resembles our own, and 23m more than in France.

“Our civil engineering costs are also comparatively high,” Gale says. “Physically digging and laying the network makes up nearly half New Zealand’s monthly wholesale broadband price alone.”

Gale says the Commission is proposing not to backdate the prices so, once finalised the prices are likely to come into effect on release of the final determinations in December 2015.

“Our revised majority view is that backdating will not promote competition for the long-term benefit of end usrs.

“However, we are still seeking views from submitters on whether they believe the final prices should be backdated and, if so, what would be an appropriate date for this,” Gale says.

Moutter says Spark was pleased the Commission is now looking to take backdating off the table, with the earlier suggestion that backdating could apply creating ‘major industry uncertainty’.

“That uncertainty caused Spark to reluctantly increase prices on most of its broadband and landline plans from February 2015 to partially offset the impact of backdated charges,” Moutter says.

A number of other ISPs also increased their charges in anticipation of the backdating.

Moutter says if the Commission confirms backdating is ruled out of its final decision, and that the decision is not subject to appeal, Spark will honour its commitment to pass the value of the price increases back to customers ‘in a fair and transparent way’.

Submissions on the draft decisions are due by Thursday 13 August 2015.

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