Chorus: A tempting proposal, some merit, some flaws

How much would it cost to build and run a copper telecommunications network if you were starting from scratch today?

That’s the question at the heart of the Commerce Commission’s mission to regulate the price service providers pay Chorus to provide customers with copper-based broadband.

Indirectly it’s also at the root of the recent financial troubles plaguing Chorus.

Working out the cost of building and running a new network is far from simple. Apart from anything else, no-one would build a fresh copper-based network today, it isn’t the smartest or the most efficient option. Newly rich countries that don’t already have copper networks aren’t building them. Instead  they move direct to wireless networks.

Rather than plough through hypothetical alternatives, Chorus has suggested the Commerce Commission cuts to the chase and uses  the actual cost of the company’s existing copper network as a starting point.

It makes sense. After all, the existing Chorus copper network is the nearest thing we have to a modern equivalent copper network.

And it’s tempting. By opening the books, Chorus would let Commerce Commission analysts see first hand what a network costs. Presumably the information will not all be made public, but there will be insights in to how these things work.

If nothing else, it will speed up the investigation.

But there are downsides, as Tuanz CEO Paul Brislen points out in his organisation’s blog:

Chorus hasn’t always made the smartest decisions when it comes to its costs and that modelling these inefficiencies and ruling them out would have to go by the by. Chorus suggests the expense and time taken to model for these would be hopeless and so it’s an all or nothing approach – you can have the data, but you can’t remove the warts.

Brislen goes on to point out rival telco CallPlus sells a similar product on the market today for less than the previously announced draft access price that caused all the fuss.

In other words, Chorus is effectively asking the Commerce Commission to factor in the company’s inefficiencies.

If Brislen is luke-warm about the Chorus proposal, opposition communications spokesperson Clare Curran is downright icy. She says:

The company does not have a great track record for efficiency or competence when it comes to rolling out the ultrafast broadband network.

Any recommendations Chorus makes which involve ‘trust us to come up with the right answers’ should be regarded with healthy scepticism. The company wants the best price possible.

She has a point. Chorus wouldn’t have come up with a proposal that wasn’t in line with getting the result it wants from the Commerce Commission.