Chorus’ share price dropped 14% when the Telecommunications Commissioner went public with a draft decision on the charges ISPs pay the company to access switches on the copper network.
The company warned investors the proposed changes might wipe $160 million from its annual earnings. CEO Mark Ratcliffe told media the move could undermine the company’s business model.
Meanwhile the ISPs think the price cuts haven’t gone far enough. The NBR reports comments from Callplus CEO Mark Callender who described the proposals as disappointing. While Kordia’s Scott Bartlett warns that holding the price of copper artificially high will damage investment in new technologies,
The spat reached government with Prime Minister John Key saying he isn’t ruling out legislation to get the outcome the government wants. Meanwhile Labour’s communications spokesperson Clare Curran made the same point as the ISPs, that holding copper prices high will stifle innovation and investment.
A tough call made tougher because Chorus both owns the copper network and wants to maximise the return it gets on that investment while also encouraging customers on to the UFB fibre network where it is building the lion’s share.
There’s a fear that customers need to be bribed or otherwise nudged to get them to move from copper to fibre. As I said: if that’s necessary, then there’s something wrong with the government’s fibre model.
New Zealand’s right-wing government which often argues the case for letting markets decide wants to intervene in this case. So much for ideological consistency.
So what’s next? Will the government make mobile data more expensive if it decides consumers prefer LTE wireless broadband over fibre?