ISPs get stuck into 'tone deaf' Chorus over broadband prices

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Retailers told the Herald that having absorbed previous Chorus price increases, they might have to pass on the latest increase to the mainstay 100Mbit/s service.
Retail internet providers Vodafone, Vocus and 2degrees say broadband price increases could be on the way, due to Chorus increasing the wholesale cost of the most popular UFB fibre plan.

Chorus' fibre price rises, on the way in October, are "Cynical, money-grabbing and unwarranted," said Taryn Hamilton, head of the consumer division of Vocus, which operated Orcon and Slingshot.

"The increases will likely hit Kiwi families in the pockets during a looming economic crisis and uncertain times."

"We are hugely disappointed Chorus will proceed with raising wholesale fibre prices in October. This tone-deaf move does nothing to help hard-working New Zealanders, who may need to pay more for their internet when connectivity matters more than ever," Vodafone said in a statement this morning.

"The wholesale input cost of fibre is already well over half of the price of Vodafone's most popular fibre broadband plan and we now have to review whether we can absorb this additional Chorus cost."

A 2degrees spokesperson weighed in, "Despite consistent feedback from its customers that New Zealand is heading into a recession and the price increase should be delayed, Chorus will use regulatory cover to increase the price of a service used by 80 per cent of 2degrees' fibre broadband customers."

Earlier, Chorus - which operates the lion's share of UFB (Ultrafast Broadband) fibre - said it was lowering the wholesale cost of its fastest plans (1 gigabit per second fibre) from July 1 from $60 to $56 per month. The company said these "1 gig" plans were the fastest growing with new customers.

Chorus also said it would drop the wholesale cost of a UFB fibre plan for small business from $3 to $52 a month.

But retail ISPs say most customers are on a 100 megabit per second fibre plan. And, there, Chorus offered no price cut - although as Covid hit it said it would delay a wholesale price increase from $46 to $47 per month until October 1 (a decision it confirmed overnight, triggering retailers' latest bite-back).

Retailers told the Herald that having absorbed previous Chorus price increases, they might have to pass on the latest increase to the mainstay 100Mbit/s service.

They are also sore that the price increase is going ahead after they had to bear the cost of across-the-board unlimited data as a Covid relief measure at the same time lucrative global roaming revenue all but dried up with border closures.

Bad debt spat

Retailers put disconnections on hold during the lockdown, but now anticipate a "wall of bad debt."

Earlier, Vocus director Mark Callander told the Herald that Chorus should shoulder some of that burden, echoing the sentiment.

Mid-June, Chorus said it would chip in $2 million to help cover bad debt. Retailers said that wasn't enough. With its new policy released overnight, Chorus did not budge on that figure.

Chorus did reiterate its previously moves, however, including $5m in payments to its subcontractors to top up wage subsidies, and its role in providing free broadband to 10,000 students for six months during the outbreak.

This morning, 2degrees' corporate affairs chief Mat Bolland said, "2degrees is calling out Chorus' claims that is offering genuine industry support, given that its relief fund is timed to end before the actual impact of Covid 19 bad debt arises - anticipated when wage subsidies and mortgage holiday support cease in September."

Bolland added, "The [$2m] relief fund is too little and ends too soon – bad debt takes time to appear and the Chorus fund ends when those facing financial hardship are still able to access government support to pay their bills.

"We're not asking Chorus or the LFCs [local fibre companies] to shoulder the bad debt issue alone, but like most businesses we're concerned about what happens when the government stimulus ends and people can't afford to pay for what is an increasingly essential service."

Chorus responds

In a statement, Chorus reiterated its price cuts for top-end and small business plans. The price increase for the mainstay 100Mbit/s plan was required to keep up its investment in its network.

"As New Zealand looks to rebuild its economy that infrastructure will be critical for the recovery," the company said.

"Now is not the time to start cutting back, and we believe most Kiwis will understand that ongoing investment in broadband infrastructure is a worthwhile investment to make."

Over, the company said its Covid response, including the $2m toward bad debt, was "fair and reasonable."

Chorus shares were up 1 per cent to $7.77 in midday trading.

The stock is up 60.3 per cent for the year.

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