Chorus applies for FPP review, files for High Court appeal

Troubled company looking for help with copper pricing review

Broadband infrastructure company, Chorus, has taken the next two steps in the broadband pricing review, both applying to the Commerce Commission for a final pricing principle (FPP) review of its initial pricing decision, and filing for a High Court appeal of the same decision.

This follows the company’s “regrettable but necessary” decision to withdraw its 2014 financial year dividend guidance last month.

“The decision to apply for an FPP and file for a High Court appeal have not been taken lightly by Chorus’ board and management, but the limitation of two benchmarked countries despite the specific factors set out in section 18 and 18(2A) has left us with no choice,” Chorus chief executive officer, Mark Ratcliffe, said.

“Completing the FPP processes for UCLL (Unbundled Copper Local Loop) and UBA (Unbundled Bitstream Access) could well mean that we take another two years to end up rebalancing at around the same aggregate price as we have today. There is also precedent for the revised prices from the FPP to be backdated.”

Ratcliffe said Chorus understands the Commerce Commission must operate within Telecommunications Act regulations, although claims its initial decision reflects regulations which do not align with the Government’s policy of a transition to fibre.

Former Telecommunications Commissioner, Ross Patterson, agrees, stating that, “The ladder of investment regulatory framework that is currently in place is designed over time to remove the natural monopoly of the access network.”

“However, the structural separation model adopted through UFB (ultra-fast broadband) accepts that the access network is a natural monopoly and building competing networks is inefficient. The two frameworks cannot co-exist efficiently.”

In total, Chorus will be investing around three dollars for every dollar of Crown funding to support the delivery of UFB ahead of demand. From 2008 to the end of 2011, about $500 million was also invested in upgrading the existing copper broadband network under Chorus’ fibre-to-the-node rollout.

The Crown has so far contributed about $160m in funding towards the UFB rollout in the form of debt and equity securities to be repaid by Chorus over time.

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Tags copper broadbandChorusUFBfibre-to-the-nodegovernment

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