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ComCom pushes out final decision on Chorus copper line pricing

19 Dec 2014

The Commerce Commission has pushed out the timeline for a final decision on what price Chorus can charge on its copper line network as it deals with a large amount of complex information, and said its initial view is that the regulated price should be backdated no further than the start of December this year.

The competition regulator expects to make a final decision on what Chorus can charge on the unbundled copper local loop (UCLL) and for unbundled bitstream access (UBA) in September next year, extending its initial target to have it settled in April, it said in a statement. The delay comes after the commission was asked for more time by interested parties, including Chorus, Spark New Zealand, Vodafone New Zealand and CallPlus, who wanted to make submissions. The draft determination increased the allowable regulated monthly price to $38.39 from the $34.44 level set by an earlier decision and which came into effect from Dec. 1.

"We appreciate that there is a large volume of complex information for submitters to review so we have agreed to a four-week extension to the consultation period," Telecommunications Commission Stephen Gale said. A conference on the issues would now be held in April 2015.

The commission also said its initial view is that the final price should be backdated to Dec. 1, 2014, but not earlier, and is seeking submissions on the issue.

The regulator considers that backdating the price to the cross-over from the price freeze that was put in place to let Chorus adjust from being part of the wider Spark, then Telecom Corp, best serves the legislation's stated aim to encourage investment.

"One potential concern in the case, where backdating would favour Chorus, is that if the amounts involved are substantial enough, they could cause a firm to exit the market, which would likely be detrimental to competition," the regulator said. "We intend to forecast the impact of potential backdating on retail service providers, and consider this when making our final decision on backdating and whether there are mechanisms that could mitigate those impacts."

Spark, Chorus's biggest customer, increased its retail prices in response to the draft price, saying it faces an extra $60 million annual bill to its input costs, and that backdating the new price means higher prices won't fully cover the increased wholesale costs.

The combined UCLL and UBA services dictate the base cost for provision of broadband internet services over the copper network, which competes with fibre-optic cable-based services that are becoming available under a government-subsidised national roll-out, the majority of which is being installed under contract by Chorus.

Chorus had sought the commission's reworking of regulated charges because it argued lower than anticipated monthly charges for copper-based broadband services would frustrate the government's policy goal of rapid public uptake of UFB.

The new draft rate, which does not yet apply and is subject to further submissions from the industry, is still $6.49 per month lower than the $44.98 monthly rental for UCLL and UBA that had applied until the start of this month.

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