Amy Adams hits back as "Axe the copper tax" coalition launches
"Dropping the price of copper broadband will kill UFB uptake"Featured comment
UPDATE: ICT Minister Amy Adams has hit back at the Coalition for Fair Internet Pricing, launched this morning.
“From time-to-time, there are inflated claims made by various sector groups with their own view of the world," Ms Adams said when NBR ONLINE asked the minister for a response to the coalition's claims.
The Coalition objects to the government over-riding the Commerce Commission's proposed steep cuts to Chorus' wholesale homeline pricing. Ms Adams has proposed much more modest cuts, which the government will decide. The Coalition says households will pay $600 million in extra broadband and phone line fees by 2020 (or around $150 extra per household per year), compared to what they would have paid if the original cuts had been pushed through.
Coalition spokeswom and Consumer NZ CEO Sue Chetwin denies the figure is inflated. “The government's proposal would introduce what economists Covec say is a new tax of at least $600 million on Kiwi broadband customers. Our independent economists have told us the tax is probably much more than $600 million, but we preferred to use the lowest and most conservative estimate."
And way call it a "tax"? Matthew Hooton, whose company Exceltium is providing comms for the Coalition, says "A tax is a cost the governement imposes on you to pay to another" - the "other" cost being the public-private Ultrafast Broadband (UFB) rollout, which is being running $300 million overbudget for Chorus.
Ms Adams says, "The simple fact is that under the government's proposals the price that New Zealanders will pay each month for their copper broadband will drop. Any suggestion to the contrary is absolutely incorrect.
Chorus has argued that cheaper copper broadband would hinder (already sluggish) uptake of fibre rolled out under UFB scheme.
Ms Adams picked up on this theme this afternoon, saying "At the same time as we are giving New Zealanders cheaper copper broadband, we are also building a world-class ultra-fast broadband network. It's the best of both worlds for Kiwis.
“What we are going through now is a once-in-a-many generation shift from one complete technology network to a replacement network, and the question that has been asked is whether the pricing framework is properly calibrated to deal with that transitional investment.
And although the government is poised to over-ride the regulator and set lines pricing itself, the minister adds, “We need to acknowledge that the Commerce Commission’s price-setting processes are still continuing and are also subject to appeal. This could lead to two or three years of litigation at a time when investors, retail providers and consumers are seeking certainty."
Ms Adams says she acknowledges there are some concerns with the government's proposal, but that a formal feedback process is already in place for her recently released discussion document.
Her office also added the barb that on August 13 last year the Commerce Commission indicated its recommended final prices were likely to be higher than the initial draft prices.
The Coalition says the government keeps changing the rules, and that it's problematic for the Crown to be both investing in Chorus (the Crown is buying $929 million in non-voting Chorus shares and interest free debt securities), and the company's regulator.
It also stresses that Chorus made a $171 millon profit last year.
"The estimates used today are based on a draft price issued at the start of a long regulatory process," Chorus said in a statement this afternoon.
"That price has never been implemented and describing this as a 'new tax' is clearly misleading and incorrect," Chorus CEO Mark Ratcliffe says.
"The issue at hand is deciding the extent to which wholesale prices may decline, at the same time as ensuring that consumers continue to benefit from investment in high quality broadband infrastructure and investors get a fair return. That process is ongoing.
“Entry level fibre broadband wholesale price is significantly lower than the current copper broadband price, meaning that this initiative will also deliver savings for consumers."
InternetNZ - no benefit
InternetNZ sees no positive flow-on effect for the UFB.
The net effect of the government's proposals would be to transfer $600 million from Kiwi broadband subscribers into the pockets of Chorus shareholders," CEO Jordan Carter told members this afternoon.
"There is no benefit from this: no faster UFB rollout, no better services, no new jobs, no new investment. Nothing."
EARLIER: A new lobby group called the Coalition for Fair Internet Pricing launches in Wellington today at 12.30pm.
It's pushing for the government to go through with deep cuts to Chorus' wholesale copper phone line pricing suggested by the Commerce Commission last year - instead of ICT Minister Amy Adams' proposal for much more modest cuts.
The group claims Ms Adams' move is transferring around $600 million in potential household phone bill savings to Chorus' back pocket.
The coalition's members include many of the organisations involved in the Drop the Rate, Mate campaign, which formed part of a successful push to get mobile termination rates (MTR, or charges by phone companies when calls terminate on a rival's network) regulated downward. However, there's also the notable addition of some retail ISPs.
- Consumer NZ
- the Telecommunication Users Association of New Zealand (Tuanz)
- CallPlus (including Slingshot
- the Federation of Maori Authorities
- Hautaki Trust (the minority iwi investor in 2degrees)
- KLR Holdings (2degrees founder Tex Edwards' investment vehicle)
- National Urban Maori Authorities
- New Zealand Union of Students’ Associations
- Rural Women
- Te Huarahi Tika Trust
- Unite Union.
Exceltium - the lobbying and PR firm run by right wing commentator Matthew Hooton - is providing the groups communications.
The announcement for the event says, "The purpose of the media conference is to launch the coalition’s campaign against the government’s proposal for a new internet tax with which to subsidise Chorus Ltd," - presumably a reference to the government's decision to over-ride a Commerce Commission recommendation to slash wholesale copper line pricing. The government is looking at several alternative options for more modest cuts, which it would set directly."
Various members of the coalition have already said the government's failure to pursue the steeper wholesale Commerce Commission's draft determination price cuts will cost households hundreds of dollars over the next three years if the cuts are as little as $2.50 a month rather than the up to $12.50 the ComCom recommended (although that argument does assume retail ISPs would directly pass on the savings. They could instead pocket some or all of the savings or, more likely, increase data caps rather than cutting price).
The Commerce Commission's draft determination saw Chorus' shares get slammed last year, and they remained cowered until the government indicated it would sideline the regulator.
Chorus argues deep cuts to copper line pricing would inhibit fibre uptake under the public-private Ultrafast Broadband (UFB) rollout, backed by $1.35 billion in taxpayer funds ($929 million of it in the form of Crown funds being plowed into Chorus).
Earlier Tuanz boss Paul Brislen likened the government sidelining the Commerce Commission over copper line pricing in favour of a direct role for itself to "the bad old days we used to see MPs debating the price of butter in the House. This is a return to that and worse - instead, we won't have the debate, the price will simply be set by the Beehive."
Today, Mr Brilsen said he didn't blame Chorus. The NZX-listed company was simply looking to maximise profit, and negotiate the best possible commercial environment. The buck stopped with the ICT Minister.
Chorus shares [NZX:CNU] were up 1.03% to $2.92 in midday trading.