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Judges probe as Chorus appeals CommComm pricing

Telecommunications infrastructure operator Chorus [NZX: CNU] has opened its case in the Court of Appeal, challenging a High Court decision in April upholding the Commerce Commission's lower-than-expected regulated prices for broadband internet services delivered over the traditional copper wire network.

In opening submissions, David Goddard QC sought to argue the commission had failed in both law and logic when it set the price for unbundled bitstream access (UBA) service at $10.92 a month, far lower than Chorus had anticipated.

He faced sustained questioning from Justices Ellen France, Lyn Stevens and Douglas White on the merits of an argument that depends first on accepting the commission was wrong in the way it applied the price-setting methodology, and that the High Court then accepted those errors, making errors in law itself in the process.

The appeal is one of several strands of activity for Chorus as it attempts to roll back as far as possible regulatory constraints on its earnings, which it says will constrain its ability to fulfil its contract to roll out the the bulk of the government-backed national fibre-optic cable network to accelerate New Zealanders' access to ultra-fast broadband.

The commission is separately reviewing its price-setting methodology, also at Chorus's instigation, with final prices to be set by the end of the year, offering Chorus another potential avenue to achieve higher prices for UBA. It argues the new UBA prices, scheduled to kick in from December, are so low as to risk discouraging consumers from switching to cable-based UFB services, which was the original policy aim of the government's subsidised roll-out.

In reaching the price of $10.92 a month for copper-based UBA services, the commission had erred by setting the rate at the same level as applied in Sweden, which along with Denmark was chosen as a benchmark for establishing New Zealand prices, said Goddard. That was because the commission had concluded that an appropriate rate in New Zealand would be higher than Sweden's.

All three judges questioned that reading of the process and the requirements on the commission, with Justice Stevens challenging Goddard's contention that $10.92 a month was "logically incoherent".

If Goddard was right, that implied "it (UBA pricing) would be logical at $10.93, which rather points to the technical nature of your argument," said Justice Stevens, who suggested the legislation governing regulated price-setting ultimately boiled down to a matter of judgement.

"Yes," replied Goddard. "It is a matter of judgement, but the judgement must be one that isn't internally inconsistent or illogical."

The hearing is continuing.

(BusinessDesk)

Comments and questions
3

Give it up, Chorus. Stop being such a pack of weiners and get on with the job you signed up for. If you don't want the job we'll give it to NorthPower - no problem there.

But to argue that the Commerce Commission and the High Court Judge and the entire telco industry got it wrong and you're right...

This is ar*e-covering of the highest order.

Stop wasting shareholder funds. Try building the network instead.

I know nothing about telecommunications. But does not Chorus have every right to question a decision that affects the future of their company?. Especially a decision that is made by a bunch of bureaucrats that have never owned a business.

It does indeed. But when the company also says it's working constructively with the industry (it's not) has the best interests of its shareholders at heart (it doesn't) and complains that the process is too long, dragging it all through the courts beyond the High Court seems a bit too faced.

The problem Chorus has is that its senior managers didn't understand the radical change to its revenue stream that moving from retail minus pricing to cost plus pricing would deliver.

Why they didn't see it coming when the rest of the industry did, and after Steven Joyce gave them a three year freeze to get ready for it is a question nobody's put to the exec yet.

I trust someone will at the next shareholders meeting because after all the wailing and gnashing of teeth is over, when all the finger pointing has finally gone away, this turn of events rests entirely with the Chorus executive team.