Chorus takes aim at 'Boost' criticisms

Chorus [NZX: CNU], the telecommunications network operator, has hit back at claims its proposed Boost variant services would breach the terms of its regulation, saying the regulator's legal advice is at odds with the law, and needs to be seen in the wider context of the changing market.

In a submission to a Commerce Commission consultation paper on Boost, Chorus says the regulator's legal advice claiming the variant service would likely breach the rules engineered a finding where general obligations overrode the specific, an approach the network company said is "unheard of." Chorus wants to install the services, which it says would increase the reliability of high-definition video and are the type of innovation envisioned by the new regime.

The commission sought feedback on a legal opinion by David Laurenson QC and James Every-Palmer, which said Chorus's plans were inconsistent with the 'good faith' provisions of its standard terms determination, in that they were an attempt to constrain the regulator service on the copper network, would hold back end-user throughput, and would define and constrain regulated services by Chorus's view of reasonable usage.

"If this principle was accepted, it would put a regulated entity in an impossible situation - trying to anticipate general obligations that may or may not override specific and descriptive requirements with the risk of enforcement if those general obligations are not correctly anticipated," Chorus said in its submission. "Even the commission advice acknowledges that key questions on the delivery of the UBA (unbundled bitstream access) service cannot be answered against such a standard."

Even if general issues trumped specific, Chorus said the advice misunderstood the context, was based on flawed analysis, and raised fundamental issues with the regime.

The commission sought the legal opinion after Spark New Zealand, formerly Telecom Corp, requested an investigation. In its submission on the Boost services, Spark said it didn't see enough commercial value in the variants to warrant a premium, and that combined with plans to degrade the existing regulated service, breached the good faith obligation.

Chorus denied claims by internet service providers the Boost variant was degrading the service, saying it would increase capacity to allow greater throughput, the average speed over the company's network, and maintain that as connection numbers grow.

"Chorus is incentivised to solution its existing funding gap through a range of initiatives including offering enhanced services for enhanced revenues," it said. "Absent the funding gap, Chorus would, as an open access wholesaler, still be committed to better broadband and be incentivised to make new offerings to the market for revenue gain - this makes commercial sense."

Chief executive Mark Ratcliffe said the proposals need to be considered in the context of "significant shifts occurring and being forecast in end-user demand' and have been taken after wide consultation with customers and other stakeholders.

"We would like to note that we think a battle of public legal opinions in isolation is a major distraction from the market context and the assessment of the long-term benefit of end-users by providing choices beyond the standard regulated service," Ratcliffe said. "We encourage the commission to consider the wider market context in its decision-making."

The commission is considering the extent to which the new variant services would complement or substitute existing regulated UBA services, what investment they would need, and whether the changes are consistent with the Telecommunications Act. The regulator will also consider whether the proposed changes, including the withdrawal of the VDSL and bandwidth management services, are allowed under existing regulation, and what the impact will be on consumers.

Shares of Chorus were unchanged at $1.72, and have gained 19 percent this year after being punished in 2013 during the height of regulatory uncertainty.

(BusinessDesk)