The decision by the Commerce Commission to hike regulated Chorus line charges for copper broadband and landline services is the “worst possible Christmas present” for New Zealand consumers and businesses.
That’s the damning view of Spark New Zealand, who along with sections of the telecommunications industry, have slammed new price charges released this week.
The new charges are almost $8 per month (including GST) per connection higher than what all New Zealand retail broadband providers currently pay, and almost $4 a month higher than the Commerce Commission proposed in its second draft decision just a few months ago in July.
As the Chorus line charges represent about half the typical retail price for broadband and landline voice services delivered over the Chorus copper network, Spark believes the decision has a “substantial impact” on what most New Zealanders will pay for their internet or landline phones.
“We had been hoping that the Commerce Commission decision would allow us to pass on some savings to customers from retail price increases earlier this year, if the Commission had stuck to its decision not to backdate when the new higher charges would take effect,” says Simon Moutter, Managing Director, Spark New Zealand.
“However, while the Commission has confirmed no backdating, given the significant and unexpected cost increase we will have to assess the impact of this decision on our ability to return savings to customers as previously indicated.
“We are now also forced to increase our retail voice and broadband pricing to take into account the significantly increased costs now faced from higher regulated Chorus line charges.
“While the Commerce Commission decision is effective from tomorrow, it will take months before the higher charges flow through completely into pricing for our customers. We will be advising customers of pricing impacts as soon as possible.”
For Moutter, the “massive swings” in successive Commerce Commission decisions within a matter of months makes it “extremely hard” for any business to invest, plan and price its services effectively.
“We have now had two years of market disarray, with significant fluctuations at every stage of the process,” Moutter adds.
“The losers out of this are New Zealand consumers and businesses.”
Moutter believes the Commerce Commission decision means that New Zealanders will pay almost double the median regulated lines charges in other comparable countries.
In addition, it also means that the regulated charges for access to the ageing, decades old Chorus copper network will now “significantly exceed” access charges for entry-level plans on the new state-of-the-art UFB fibre network.
“This decision is doubly frustrating given the efforts taken with customers to help keep broadband and landline prices down,” Moutter adds.
“This decision is a slap in the face for the 50,000 customers who joined Spark earlier this year to send submissions to the Commerce Commission asking it to keep Chorus charges down, as part of Spark’s Be Counted campaign.”
Echoing Moutter’s comments, Russell Stanners, CEO, Vodafone New Zealand says the telco is “extremely disappointed” with the copper pricing announced by the Commerce Commission.
“The pricing set is even higher than the in the Commission’s draft decisions, and is well out of step with international benchmarking,” Stanners adds.
“The decision to increase prices means that it will be necessary for us to thoroughly review our pricing for fixed line services. It is likely that the increased charges will get passed through to the customer.
“It is unfortunate that New Zealanders will continue to be charged much more for copper access than friends and family around the world.”
Adding another critical voice to the decision was TUANZ, who warn that the final copper pricing decision puts New Zealand “out of step” with rest of world.
As a result, the organisation predicts that the Commerce Commission draft decision on wholesale copper charges will likely lead to higher prices for users which puts New Zealand further out of step with the rest of the world.
Recent research by organisations such as the ITU already have New Zealand pricing comparing poorly.
The final price announced adds a further $3.30 to the previous draft meaning that there’s been a steady increase from the Initial Pricing decision of $34.44 to this final wholesale price of $41.69.
Users had seen the benefit of initial lower prices flowing through as a result of the process and improved competition but now will likely face further increases in their monthly charges given this final price applies from December 16, 2015.
“These prices will have a direct impact on users, and especially those users who are unable to take up UFB services,” adds Craig Young, CEO, TUANZ.
“These include the 20 percent of the population who live rurally, and who have no other fixed line options and will continue to rely on copper phone lines for the foreseeable future.
“This decision also lends weight to ensuring that we as a country get the current review of the Telecommunications Act right so that post 2020 we establish an internationally competitive business environment when it comes to the cost of connectivity.”
Young says that while TUANZ recognises that the Commerce Commission is an independent arbiter who must apply the law around these pricing processes as it stands, the organisation remains disappointed that the end users look to have lost out in this latest decision.
“We are though happy that the Commission has decided (in a split decision) to not apply any backdating to the pricing which is a positive outcome for users,” Young adds.
Looking ahead, Young is also concerned that this may not be the end to the more than two years of uncertainty as there is the possibility that one of the telecommunications providers may choose to challenge the process in court given the material size of the latest price rise.