Chorus offers investors connections update as UFB footprint expands

“Many of our investors have been eager to know how this work is progressing..."

As part of Chorus’ regulatory update unveiled today, the telco reports that fixed line connections increased by 6,000 lines over the three month period to 30 September to a total of 1,783,000 lines, while total broadband connections increased by 15,000 to 1,178,000.

Announced to institutional investors and analysts, Chorus says its UFB network deployment continues to be “ahead of schedule” with fibre passing about 286,000 premises at 30 September, meaning 386,000 end-users are within reach of ultra-fast broadband.

Fibre connections grew to 53,000 across Chorus’ nationwide network at 30 September and about 37,000 fibre connections are within Chorus’ completed UFB network footprint.

Also, Chorus’ rural broadband rollout has brought 75,000 rural lines within reach of better broadband by 30 September.

TSLRIC modelling choices

Chorus also gave its latest views on potential economic cost modelling (TSLRIC) outcomes and other regulatory and government related matters.

Early in the Commission’s FPP process, a hybrid TSLRIC copper modelling approach was publicly outlined by global telecommunications consultancy firm Analysys Mason, work Chorus says it can continue with.

Modelling from Analysys Mason will be submitted to the Commission on 1 December 2014 in line with the Commission’s published timetable.

“Many of our investors have been eager to know how this work is progressing, so to assist the market in further understanding how this particular form of economic modelling technique may be approached, we have set out three scenarios derived from Analysys Mason’s modelling work,” says Mark Ratcliffe, CEO, Chorus.

“Under the first scenario, our work with Analysys Mason so far suggests that if we built a copper network that delivers the services provided by Chorus today, without re-using any existing infrastructure at all, it would cost around $16 billion.

“While that full valuation of the network provides a valid starting point for considering value, final FPP prices determined by the Commission are expected to be less given the range of matters upon which it will ultimately take a view.

“We also note that in the real world market, pricing would of course be constrained by market realities including the need for Chorus to compete with other access networks and technologies.”

Ratcliffe says the Commission has “engaged its own cost modelling firm” and it may model fibre costs instead of copper and the model will be the Commission’s own view of how to build a hypothetical new optimised network from scratch.

“The Commission will also decide various parameters that, combined with its modelling choices, will determine the final FPP prices,” he adds, insisting the Commission has not yet provided preliminary views on all parameters that it may use.

“As such, Chorus has also outlined two further scenarios where the parameters are applied in different ways.

“We have consistently said that we believe evidence does not support aggregate copper pricing below demerger levels of around $45 a month, and that rebalancing is likely between layer 1 and layer 2 pricing, and the progression of modelling continues to support this view.”

The Commerce Commission is scheduled to release draft FPP determinations on 1 December 2014.

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