Chorus still faces challenges regarding its copper-line
pricing. Photo supplied.
Brokers still remain positive about the future of lines
company Chorus, despite the dismissal by the High Court of its
appeal over the Commerce Commission's pricing decision.
Forsyth Barr broker Suzanne Kinnaird said under the governing
regulations, Chorus was not allowed to challenge the merit
result of the decision.
''All Chorus could argue was the Commerce Commission had made
a mistake in its interpretation of the law. Basically, the
court has said no mistake was made.
''This doesn't change our view on Chorus as I had not assumed
the case would be successful.''
A cost-based review of Chorus' unbundled bitstream access
(UBA) and unbundled copper local loop (UCLL) services would
continue and that would define Chorus' valuation during the
next 12 months, she said.
However, Ms Kinnaird expected there would be ''reasonable
coverage'' of the court decision, which would cast Chorus in
a negative light.
Forsyth Barr had an outperform rating on Chorus.
Chorus general counsel Vanessa Oakley said the company would
review the court's findings in detail.
It was important a regulatory decision of such significance
for investment in communications infrastructure, enabling
better broadband for New Zealand, was reviewed by the court,
The only appeal permitted in the regulatory framework was
over a question of law, and not a review of the merits - as
is permitted in other industries.
''We have always acknowledged the commission had significant
challenges in applying the law as it stands and we remain of
the view that benchmarking is an outdated methodology,'' Ms
The decision yesterday left the status quo in place, she
Chorus continued to focus on the parallel commission
processes that used cost modelling for the first time to
review the benchmarked prices of regulated services.
The commission recently said it was aiming to complete the
price reviews by December 1.
''If the commission meets the timetable, the cost-modelled
price for UBA and a new cost-modelled price for the UCLL
service would apply from December 1,'' Ms Oakley said.
Forsyth Barr had increased its target price for Chorus shares
by 20c to $2.10 a share and left its earnings forecasts
The shares last traded at $1.76, down 3c.
Ms Kinnaird said the focus must now shift to the final
The commission had scheduled a workshop for May that would
cover the key assumptions that would underlie the final price
''This workshop should provide indicators as to if we should
expect movement in UBA or UCLL prices. Various submissions
and consultation papers are due in April that may start
shedding some light on the process the commission will define
for actually setting a price,'' she said.
Unbundled copper local loop service is the metallic
path facility (MPF or copper pair) that goes from a
customer's home or business to the main distribution frame
(MDF) in the local exchange. Internet service providers
(ISPs) can deliver their own copper-based services to
customers who are connected to the exchange via the Chorus
local copper network.
Unbundled bitstream access is considered a key tool
for opening competition in the broadband market. It enables
competitors to offer their own products to consumers even if
they do not operate the local loop (the last kilometre).
Bitstream access allows the new entrant to use high-speed
modems and other equipment provided by the incumbent and
avoid maintenance and investments into the local loop.