Independent review finds Covec conservative on Chorus transfers

An independent peer review says Covec’s estimate of the amount Chorus stands to gain from the government proposed changes to copper pricing is “conservative in all scenarios”.

Vodafone commissioned telecommunications consultants Network Strategies to review the earlier report after Communications Minister Amy Adams accused the Coalition for Fair Internet Pricing of misleading claims. At the time Adams said coalition claims were “hyperbole and scare tactics based on fiction”.

Fundamentally flawed

Separately Prime Minister John Key said the Covec report was “fundamentally flawed”. This is directly contradicted in the review where Network Strategies describes Covec’s fundamental logic as ‘sound’.

Earlier the Coalition launched a campaign against the proposed changes using figures from the Covec report. Its key finding is an estimate changing the price of copper broadband will cost NZ consumers and businesses an additional $600 million.

Before the government stepped in, the Commerce Commission ruled that the price of a copper broadband connection should fall by up to 20 percent.

Although this was flagged at the time Chorus demerged from Telecom NZ, the company charged with building most of of the government’s ultrafast broadband network has lobbied for that price cut to reduced.

The Coalition says that money will go to Chorus and is effectively a transfer directly to Chorus shareholders. Vodafone has also made a similar point.

Wide ranging opposition

The Coalition for Fair Internet Pricing brings together carriers, Tuanz, InternetNZ, consumer advocacy groups and others. Significantly Vodafone is not a member. And interestingly from a political point of view the group’s members range across the political spectrum including prominent National Party supports and trade unions.

In the report’s summary Network Strategies writes:

We found the assumptions that Covec has applied are relatively conservative, and as such the Covec results would tend to be an underestimate of the transfers to Chorus.

It says the amount Chorus will receive will grow higher the longer customers keep copper connections. Covec assumes 45 percent of households will transfer to fibre by 2020 – a figure much higher than the 20 percent in the Chorus contract.