Commerce Commission squeezes Chorus again

Telecom NZ’s plan to demerge Chorus saw as much as possible of the parent company’s regulatory burden bundled into the network spin-off.

Some regulatory costs were anticipated and built into the share price. No doubt there was a provision for unknowns.

However, it’s unlikely anyone could have foreseen the sheer extent of regulatory costs foisted on Chorus. Inside the company headquarters it must feel as if regulators see the business as a milch cow.

Today the Commerce Commission confirmed Chorus is to pay 13 percent of the Telecommunications Development Levy – some NZ$6.4 million. The money pays for the government’s rural broadband initiative, which, in part, Chorus is building.

The TDL follows an earlier Commerce Commission decision to cut the price of unbundled bitstream access – that’s the money service providers pay Chorus to sell copper-based services.

Add these to the cost-blowouts on connecting homes to the fibre network and Chorus is being squeezed on all fronts.

Regardless of your opinion about the justice of the Commerce Commission decisions, costs and uncertainty are mounting at Chorus.

It was never meant to be that way. The business is structured as a utility. Investors like utilities because of their stability. Life for Chorus is anything but stable.

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