Chorus carve-out stokes competition, diminishes need for regulation

Telecom's spin-off of network operator Chorus into a separately-listed entity last year has stoked competition in backhaul services on the country's main copper-lines infrastructure and dimmed the need for regulatory oversight, the Commerce Commission says.

The regulator has just conducted its fourth competition review of backhaul services for the unbundled local loop (UCLL), unbundled copper low frequency (UCLF) and unbundled bitstream access (UBA), which lets telecommunications companies assess transmission capacity from those exchanges to offer services such as voice and broadband connection.

The commission will continue to keep tabs on 44 of the 215 UCLL/UCLF primary links between a local exchange and a main exchange where a telecommunications company can interconnect, and two of 38 regional links between those main exchanges, it says.

It had previously required regulation of 127 primary links of 168 reviewed and four secondary links.

"We're glad to see the [backhaul] market becoming more competitive as it's a key enabler of both UFB [Ultrafast Broadband] and [RBI] projects," Tuanz chief executive Paul Brislen told NBR.

"Assuming Vodafone is granted clearance to buy Telstraclear [the Commerce Commission will rule on October 23] we would hope to see yet more competition in backhaul services.

"All of which should flow through to the price we customers pay at the other end. I'd hope to see increased data caps and lower prices as a result"

Competitiion stems from separation
"The increase in competition is mostly due to the separation of Telecom in November last year," Telecommunications Commissioner Stephen Gale says. "At that time, Chorus and Telecom split the spare fibres on backhaul links so there was an immediate jump in competition for those links."

The government previously imposed regulation on Telecom's ageing copper network as part of an enforced operational separation of the Chorus unit amid fears the phone company was not selling access to those lines on equal terms, which subsequently extended into monitoring competition on the backhaul network.

That has become less of an issue since Telecom demerged with Chorus last year to free itself from that regulatory burden and let the network company successfully pitch for the government's subsidy to build a national fibre infrastructure.

Mr Gale says the regulator has also seen more backhaul investment by other telecommunications companies.

Of the links assessed, the commission found an appropriate level of competition on 80% of UCLL/UCLF backhaul primary links, 68% of UBA backhaul primary links and 95% of UCLL/UCLF and UBA backhaul secondary links.

Shares in Chorus rose 0.3% to $3.32 in trading today, while Telecom's stock gained 0.4% to $2.40.

With reportiing by BusinessDesk