Aussie govt moves to cost-based broadband pricing, hesitant NZ govt seen as 'clearly compromised'

The Australian version of our Commerce Commission, the ACCC, is proposing cost-based prices for wholesale broadband services on Telstra’s copper network.

As Chorus mounts a rear-guard fight against a similar move here, that's grist to the mill for Telecommunications Users Association CEO Paul Brislen.

"The New Zealand Telecommunications Act specifically calls for a move to this methodology. There is really no other way of assessing how much a retail partner should pay for a wholesale service, given the separation of Telecom and Chorus and the government quite rightly spelt it out in the Telecommunications Act when it was introduced two years ago," Mr Brislen says.

Chorus has said a move to cost-based pricing, and attendant wholesale copper broadband price cuts suggested in a Commerce Commission draft ruling, could slice 40% off its earnings from 2015. Shortly after Chorus shares dived on the November 30 ruling, Prime Minister John Key said his government will intervene with new legislation to over-rule the Commission if necessary. And ICT Minister Amy Adams has promised a review of the existing legislation, calling a regulatory pause in the meantime.

Mr Brislen wonders what all the sudden fuss is about, given the revised Telecommunications Act was passed in 2011.

"The industry has known about the move to cost-based wholesale pricing since then. Chorus has known about it since then. The government has known about it since then, because it wrote the legislation," he says.

"To turn around two years later and say the Commerce Commission process is wrong, that the government must protect Chorus’s revenue when the entire industry (and customer base) has been waiting for this determination so we can get on with the job of lowering retail prices, all in the name of providing certainty for the market, is farcical and opens this government up to allegations of favouritism."

For far too long customers were caught between a government that refused to act and a phone company that ruled the industry, the Tuanz boss says.

"We watched as time after time the government declined to step in on behalf of customers. Finally we managed to break that stranglehold and in the past five years we’ve seen competition and investment on a scale we’ve not seen before.

"This government seems determined to return us to a world where one telco gets to call the shots and we, the customers, have to pay the price. The government is clearly compromised over this decision. It is both investor in the network and policy maker – now it’s trying to override the regulator as well and that’s just not going to work."