New Zealand’s Commerce Commission on Tuesday published its final decision on wholesale broadband prices, the figure coming in higher than the one proposed in the summer, news that was welcomed by network operator Chorus but lamented by incumbent operator Spark.
Effective on Wednesday, Chorus can charge NZ$41.19 per month for wholesale copper broadband, made up of NZ$29.75 for unbundled copper local loop (UCLL) and NZ$11.44 for unbundled bitstream access (UBA). The new prices are on a glide path and will increase slightly over the next five years to reach NZ$42.35 (see chart).
The new figures are several dollars higher than the NZ$38.43 per month the Commission proposed in July and some way above the current price of NZ$34.44. However, they remain below the NZ$44.98 Chorus was able to charge prior to December 2014.
"Significant changes, such as the need to increase the amount of trenching required to physically lay the network and adjusting the make-up of fibre and fixed wireless connections, led to the final price rising," telecoms commissioner Stephen Gale said.
"This has been partially offset by other changes, including a decrease in the allowed rate of return for Chorus due to the fall in interest rates since July, and the removal of v acant properties from the model," he added.
Chorus increased its EBITDA guidance for the 2016 financial year to NZ$580 million-NZ$600 million, up from NZ$546 million, as a result of the decision.
"We have consistently said that the previous draft prices significantly underestimated the true value of Chorus’ network, so it is pleasing that the Commission has taken on board the industry’s repeated requests and used some of the real world costs of building a network," said Chorus CEO Mark Ratcliffe.
However, he noted that Chorus is disappointed that the Commission elected not to backdate the price hike.
Its disappointment is likely less than that felt by retail provider Spark, which described the new price limit as "the worst possible Christmas present for New Zealand consumers and businesses."
The telco insisted that the move will affect the prices paid for services by end-users.
"We are now also forced to increase our retail voice and broadband pricing to take into account the significantly increased costs now faced from higher regulated Chorus line charges," said Spark New Zealand managing director, Simon Moutter.
Spark claims that the new prices mean New Zealanders will pay almost double the median regulated line charges in other comparable countries, warning that regulated charges for the Chorus copper network now exceed those for entry-level plans on fibre.
"The massive swings in successive Commerce Commission decisions within a matter of months makes it extremely hard for any business to invest, plan and price its services effectively," Moutter said. "We have now had two years of market disarray, with significant fluctuations at every stage of the process. The losers out of this are New Zealand consumers and businesses."
