New Zealand’s Commerce Commission on Thursday published its latest draft decision on the pricing of wholesale copper broadband, proposing to allow Chorus to increase its rates, despite a fierce campaign for lower prices from retail operator Spark.
The Commission proposed a wholesale price of NZ$38.43 per month for broadband – including unbundled copper l ocal loop (UCLL) and unbundled bitstream access (UBA) – for the next five years. That figure is essentially in line with its previous proposal late last year (see chart) and almost NZ$4 higher than the price Chorus is currently allowed to charge.
"The modelled price released today is very similar to the draft we released in December and continues to reflect that New Zealand’s local loop network is unique when compared to overseas benchmarks," said telecoms commissioner Stephen Gale.
"We have done further analysis on why this is, and it’s clear that our dispersed population is a significant cost factor," Gale said.
Incumbent retail operator Spark has been lobbying for lower prices, pointing out that wholesale copper charges in New Zealand are significantly higher than in other similar markets.
Prices are 80% higher than "the median of countries we like to compare ourselves with," including major Western European markets, the U.S. and Australia, Spark said in its campaign, which by Wednesday had attracted 52,000 supporters from the general public.
But the Commerce Commission rejected Spark’s premise.
"Simplistic comparisons of international wholesale broadband prices do not tell the true story," Gale said. "New Zealand’s average cable length per connection is 64 metres. That is 13 metres more than in Sweden, the nation that most closely resembles our own, and 23 metres more than in France," he explained, adding that civil engineering costs are also high.
Chorus, meanwhile, is still pushing for even higher wholesale rates.
"Chorus continues to believe that the draft pricing significantly undervalues the true cost of network investment in New Zealand," Chorus CEO Mark Ratcliffe said on Thursday.
"Extensive data from our network rollout experience, urban UFB pricing agreed with the Crown and the comparable value of the Commission-regulated electricity networks all support the view that aggregate pricing should be at or above 2011 levels," he said.
Prior to December 2014, Chorus was able to charge $44.98 per month for wholesale copper broadband connections.
Chorus has also expressed concern about other areas of the Commission’s draft decision, namely its proposed reduction in transaction charges and decision not to backdate pricing, and said its submissions to the Commission throughout the remainder of the pricing process in the second half of the year will reflect that.
Interested parties have until 15 August to submit their opinions to the Commission, which will make a final determination in December.
