The Opposition failed to land a blow on the Government
yesterday regarding the treatment of lines company Chorus.
New Labour leader David Cunliffe led off the questions on
Chorus, asking Prime Minister John Key if he still believed
Chorus ''will go broke'' if the Government did not intervene
to change the pricing for access to the old copper-based
broadband network as proposed by the Commerce Commission.
Despite Mr Cunliffe, new deputy leader David Parker and Green
Party co-leader Russel Norman pressing Mr Key for details,
the prime minister was not fazed.
Mr Key defended comments Chorus might go broke, saying the
Cabinet had received advice based on commercial and
in-confidence briefings between Chorus and the Ministry of
Business, Innovation and Employment.
Chorus earlier released its submission on the Government's
discussion document ''Review of the Telecommunications Act
2001'', saying it supported the Government stepping in and
updating the policy framework as proposed in its discussion
''It is clear the current framework is no longer fit for
Former telecommunications commissioner Ross Patterson was one
of three independent experts who Chorus said supported the
development of a high-quality, stable and predictable
regulatory environment in New Zealand.
Dr Patterson said the current regulatory framework was not
fit for purpose and undermined the Government's vision to
switch people from the old copper lines and to the fibre
network still under construction.
''The policy objective is no longer to promote competition in
telecommunications markets by driving competition deeper and
deeper into the network of a vertically integrated
incumbent,'' Dr Patterson said in his report.
''Instead, the policy is to create a structurally separated
network to replace the legacy copper network with a
next-generation fibre network in the most efficient manner,
to ensure consumers receive the benefits of ultrafast
broadband as quickly as possible.''
Dr Patterson was tasked with forming a view on the ''best
practice'' telecommunications regulatory framework which
should apply to the new fibre network from 2020, and what
should be put in place to attain that.
Ms Adams sought the review after Telecommunications
Commissioner Stephen Gale proposed sharp cuts to the
regulated price of unbundled bitstream access (UBA), a
copper-based service, something the Government viewed as
undermining its bid to underwrite the building of the fibre
The proposed cuts to UBA pricing came after a three-year
freeze and were seen as a way to offset the national
averaging of the price of unbundled copper local loop access,
which effectively increased prices for urban customers,
accounting for about 70% of users as part of a proposed
Submissions on the review closed last Friday and came with a
late push by a collection of lobby groups claiming Chorus
would unfairly get some $588 million in regulatory relief if
wholesale prices for unbundled bitstream access were not cut
as sharply as the Commerce Commission wants.
Craigs Investment Partners broker Chris Timms said it was
unclear whether Chorus would go broke if the wholesale
broadband cost was reduced to the level suggested by the
However, the price cut would significantly slow the
installation of the ultra-fast fibre network.
''You have people on one side saying they are being charged
too much but those same people want UFB. Which is it? You
can't have both.
''Chorus needs the income to roll out UFB. It is that
simple,'' he said.
Vodafone New Zealand, which acquired fixed line assets when
it bought TelstraClear, opposed government intervention in
its submission, saying Ms Adams' proposal ''does nothing to
guarantee success of the UFB initiative'' and was ''jumping
the gun'' after just two years of the fibre programme,
Vodafone, the country's largest mobile phone operator said
short-term intervention was unprecedented, favouring only
Chorus and undermining consistent regulation of the network
Chorus said in its submission the copper pricing framework
was threatening to undermine the key migration policy by
shifting the price relativity.
''While Chorus has got on with it and completed 20% of its
fibre build, the industry is still heavily focused on copper
Chorus had 19,000 fibre connections as at June 30 out of its
1.78 million total fixed line connections and entry-level
products were cheaper than services on the old network.
Chorus wanted UBA and unbundled copper loop (UCLL) access
pricing to be frozen until 2020, saying after the time of the
demerger it was envisaged that at a combined $45.92 a month,
it would create the best opportunity for UFB's success.
At a glance
• Commerce Commission suggested it cut what Chorus charges
retailers for access to wholesale copper internet services by
$12 a month.
• About $190 million of shareholder value was wiped off the
company on the day of the announcement.
• The Government proposed setting the wholesale charge for
copper line services between $37.50 and $42.50 a month.
• The Coalition for Fair Internet Pricing said the Government
was imposing a $600 million tax on broadband customers.