ComCom moves to reduce price of copper network access

Update 3.20pm - CallPlus and Orcon respond to Chorus's claims the reduction could slow migration to fibre; express concerns about glidepath

The Commerce Commission is proposing to reduce the price telcos pay to access the copper network owned by Chorus.

In a draft decision released today, the Commission is looking to reduce the geographically averaged unbundled copper local loop (UCLL) wholesale price from $24.46 to $19.75. The price reduction would be gradual and apply mainly to areas outside the main centres.

“The current urban price will remain largely unchanged, while the non-urban price will fall from $36.63 to $19.75 over the next two and a half years,” the statement reads.

Chorus has expressed concern about the changes in a statement to the stock exchange this morning.

“At a time when New Zealand is making a very significant investment in building a fibre world, Chorus is concerned that the Commission’s draft decision creates a potential disincentive for retail service providers and end customers to transition to fibre services.”

Chorus says the changes will affect around six percent of its copper-based access services. It also notes that the draft decision foreshadows possible changes to other copper network services.

“Chorus is disappointed that this creates uncertainty for investors and industry.”

CallPlus CEO Mark Callander has welcomed the Commission’s move, claiming it will see better competition in rural areas.

“With the largest unbundled network in New Zealand the announcement today is encouraging and it is likely to drive further investment, particularly in non-urban areas which suffer from a lack of competition and choice,” he says.

“By extending the reach of our LLU network more customers will enjoy the benefits of faster broadband speeds and voice services at much lower prices than they do today. This is an excellent opportunity to reduce the digital divide within New Zealand and deliver cost effective telecommunication services to as many kiwis as possible.”

Update 3.20pm – CallPlus and Orcon respond to Chorus's claims reduction could slow migration to fibre, express concerns about glidepath

In a media statement this afternoon, Callander responds to Chorus’s concerns about slowing the migration of customers from copper to fibre.

“Chorus’ comments in the media that they are concerned that this may impact on fibre uptake are concerning. Chorus is worried that if the high copper prices they charge to telcos currently are reduced, as they should be, then consumers will pay less for their broadband services making new, more expensive fibre services less attractive. The net effect is they advocate that consumers pay more for copper services.”

Callander also takes issue with the Commission’s decision to introduce a glide path.

“Since late last year everyone in the industry has been aware that a reduction was likely and was long overdue. Spreading the reduction over two and a half years may cause additional barriers for investment for some competitors,” he says.

Orcon CEO Scott Bartlett lambasts the Commission for the delay in reducing the LLU price, in a statement released this afternoon.

”They have admitted the price is wrong and that it needs to come down, but then have staggered that reduction over three-years. That’s, in our view, a terrible move that I sincerely hope is removed in the final,” says Bartlett.

“In fact the only winners out of today are Chorus, their revenues have been protected at the expense of lower prices and better broadband for consumers.”

He says today more than 95 percent of the market cannot substitute copper for fibre, irrespective of pricing. “Before the fibre rollout reaches any meaningful density, regulated copper and fibre pricing differences will be negligible and will not impact retail pricing.”

Orcon’s fibre and copper pricing is the same.

In the Commission’s annual monitoring report released this week it noted that unbundled lines grew to 105,000 by the end of 2011. Telecommunications commissioner Ross Patterson told an industry conference last month that the number of unbundled exchanges is 149.

Submissions to draft decision will close June 1.

The Commerce Comission's draft decision is available here.

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