Chorus local loop backlash, regulator extends consultations
BUSINESSDESK: The Commerce Commission is extending consultations on its draft regulations for the traditional copper telecommunications network after a backlash from the investment community, who fear its initial thinking will stifle the uptake of ultra-fast broadband.
While the commission is standing by its draft decision, it will issue a new discussion paper dealing with a wide range of differing views about technical aspects of the way the so-called "unbundled copper local loop" - the traditional backbone of national telecoms infrastructure - should be regulated and priced.
However, the commission is sticking to its original timetable for final decisions by November 30, with new pricing kicking in from December 1.
Equities analysts were still digesting the news this morning. Shares of network operator Chorus fell 1% in early NZX trading to $3 a share.
The Ministry of Economic Development is also understood to have been concerned that the commission's draft decision on Chorus's UCLL pricing runs counter to the government's $1.5 billion subsidy policy to accelerate the national roll-out of UFB.
Among submitters to raise serious concerns was Wellington funds manager Harbour Asset Management.
Managing director Andrew Bascand warned the commission in writing that the proposed approach would add to negative sentiment among institutional investors, who see the commission as taking "extreme" initial positions and creating an unpredictable regulatory environment.
“The further discussion paper will provide clarification for submitters on the relationship between the different copper based services,” Telecommunications Commissioner Ross Patterson said. “This discussion paper will provide an input into the rescheduled conference.”
A further discussion paper is expected to be released in July, with submissions due in August and a conference held in September.
Back to home
Back to top
Print
Latest
NBR SERVICES
SUBSCRIPTIONS
Sign up for NBR subscriber content or email alerts
Comments and questions3
Blame and beat the regulator as they are batting for the consumer..Nothing new.. with the new TPP..the investors can even sue the regulator...way to go
The real problem is an unclear government competition policy w.r.t. the UFB. In short, there isn't one.
Government knows it wants a fibre network, but it has imposed one on the market without fully thinking through what it means for competition in the wider industry, especially given the 10 years of regulation imposed to make the copper market more competitive. Consequently, we have a real muddle. It requires a decisive policy statement to resolve the mess.
Specifically, WHAT WAS THE GOVERNMENT'S COMPETITION INTENT WHEN INVESTING IN THE FIBRE NETWORK? Has the government invested in the UFB to provide infrastructure competition to the copper network? If so, then it is appropriate that the Commission should be doing all it can to make copper more competitive. Or has it invested to accelerate the transition from copper to fibre? If so, then it should have given explicit instructions to the Commissioner to make copper less competitive in order to make the UFB more attractive (that is, charge the Commissioner whose job it has been up till now to promote competition to in future hamper competition in order to achieve a clearly stated political uptake objective for the fibre network). It has the power to do this under the Telecommunications Act 19A - it can notify the Commission in writing that it must take note of government (economic) policies in its activities. It does not seem to have done so.
So until he is officially informed that the government's competition policy in the telecommunications sector is to skew the pitch in favour of fibre, the Commissioner is only doing what he is required to do by statute - regulate the copper network to make it as competitive as possible (noting that under the recent changes, all he can do w.r.t. fibre is enforce the agreements between Crown Fibre and the UFB Cos).
This problem has been well-signalled publicly in New Zealand (see http://iscr.org.nz/f667,18882/18882_Broadband_Policy.pdf) and internationally (see http://iscr.org.nz/f711,19746/19746_Antipodean_Broadband_BH_PTC_Conf_Jan_2012.pdf)
Moreover MED was specifically informed of this possibility via a submission in 2010 (http://iscr.org.nz/f607,17391/17391_Heatley_Howell_Regulatory_Implications_Final.pdf)
In short - the commerce commission had a collective and monumental brain-f*rt. To consider their proposal to be counter-intuitive would be a very mild understatement. Thanks to them CNU is now a bargain basement price. Institutional investors might hang on for the first dividend then bail out of the stock due the instability and uncertainty the CC has created. Does not bode well for other meddling they might be inclined to undertake following the IPOs of the SOEs.