The price of broadband could fall by about $12 a month in two years' time if internet providers pass on swinging cuts to Chorus' charges that were proposed yesterday by the Commerce Commission.
But Scott Bartlett, the boss of New Zealand's fourth largest internet provider, Orcon, is doubtful. He said Telecommunications commissioner Stephen Gale already seemed to be signalling "almost in code" that the commission would back down from the steep cuts when it finalised its decision on wholesale pricing in June.
Prime Minister John Key signalled that the Government was concerned about the effect cheaper copper-based broadband could have on the fibre-optic ultrafast broadband network, in which the Government has agreed to invest $1.3 billion.
He did not rule out using legislation to overturn the proposed price cut yesterday.
Speaking at the post-Cabinet press conference, Key said that the commission's report posed problems for the roll-out of ultrafast broadband (UFB). "It has significant implications both for [Chorus] and for UFB. It substantially reduces the income of that company and its capacity around broadband," he said.
In a separate decision made yesterday, the commission trimmed the price Chorus can charge for phone lines by less than a dollar a month after originally proposing a $5 average cut in May.
"History seems to show every time we have a determination, the final price is always much higher than in the draft," Mr Bartlett said.
CallPlus chief executive Mark Callander says it is "quite realistic" to expect phone and broadband prices might go up $4 a month from December 2014 in towns and cities where unbundled phone lines have been priced more cheaply.
However, the draft ruling on broadband pricing spooked Chorus investors who sent the company's share price plunging 14 per cent. Chorus said the combined effect of the two rulings would be to knock $170 million to $180m off its annual earnings.