ComCom's decision will reach beyond Chorus: Ovum

Ovum says it would be naïve to think that the $1 billion shortfall confirmed by the Ernst & Young report will be borne by shareholders alone.

Industry analyst firm Ovum says the impact of the Commerce Commission’s UBA decision will reach beyond Chorus.

“Coupled with the cut to ULLS pricing, ComCom’s decision will affect uptake of fibre by making copper relatively more attractive to both end users and to the retail ISPs, which supply them,” Ovum says.

“Chorus and the other UFB investors are structually separated and so are dependent on these ISPs to promote fibre to end users. The ISPs now have less incentive to do so.”

The analyst firm was commenting on the Commerce Commission’s decision on access determination for copper-based unbundled bitstream access, cutting prices for a basic UBA service by 23 per cent.

Ovum says it would be naïve to think that the $1 billion shortfall confirmed by the Ernst & Young report will be borne by shareholders alone. “Much of the shortfall can be addressed, but it is becoming clearer that this will come at a price to users.

“However, the fundamental problem remains unaddressed by this report. The tensions in the New Zealand telecommunications policy framework will persist as long as New Zealand has two access networks, FTTN and UFB, operating in parallel. Apart from the pricing problems, New Zealand telecommunications would operate much more efficiently if demand were consolidated on to one fixed access network.

“Policy currently envisages a gradual, organic migration to fibre but at some point the FTTN network must be shut down in the UFB footprint.

“If the Government remains committed to the UFB program, then migration should not be left to chance. A migration timetable, with scheduled shutdown of FTTN where UFB is established after a reasonable transition period, is the logical extension of the Government's commitment to UFB.”

TUANZ chief executive Paul Brislen says he agrees that a managed transition from one network to the other is inevitable and is needed. But he disagrees that cheaper copper will cannibalise fibre.

Read more: TUANZ's new CEO, Craig Young, to start in October

“The two networks are not synonymous with each other. Fibre offers a much better experience than copper, even when the headline speeds are similar.”

Brislen says the issue with uptake can be addressed simply. “New Zealand doesn’t have any real legitimate HD content and without that there is no incentive for the bulk of the customer base to move.

“Give customers the one thing they want and they’ll swap in droves. This is the example that has worked all over the world. There’s no reason to think that New Zealand is any different.”

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