Fibre demand has accelerated in recent months. It took Chorus five years to connect the first 100,000 fibre customers. The most recent 100,000 joined in six months.
In September, Crown Infrastructure Partners released numbers showing there were 605,000 connections nationwide for all Chorus, Northpower, UFF and Enable. That total would be higher today.
Connection speeds rising too
Customer connections are rising fast, so are their connection speeds. Chorus says customers are moving from entry-level plans to higher speeds. In order to speed the move up-market, Chorus will cut the wholesale price of gigabit fibre broadband connections for home users.
From the middle of 2019 the wholesale price for a home gigabit connection will fall from $65 to $60. Chorus promises a futher drop to $56 in the middle of 2020. This will reduce the price gap between a standard 100mbps plan and a gigabit plan, making the latter a more attractive proposition for many customers.
While dropping the wholesale price sounds like good news for consumers, it is up to retail service providers to decide whether they pass some or all of the savings onto customers. Some may do this, others may use the cut to fatten their margins.
Strange times at Spark
Writing at Stuff Tom Pullar-Strecker reports that Spark described the price cut as a step in the right direction. The company went on to say something quite strange;
…the wholesale price of fibre-optic broadband remained “far too high” and the retail prices Spark charged didn’t “allow for anything like an acceptable margin”.
This is bizarre as Spark is free to decide on its margin. If it thinks margins are not acceptable, it is free to raise prices. Any constraint on pricing comes from market competition, not the wholesaler.
The unvoiced subtext here is that Spark is annoyed that the Commerce Commission regulates fibre pricing. This means they have no leverage to demand a sharper wholesale price than other service providers. By law Chorus and the other fibre companies must offer the same wholesale price to everyone.
Given that Spark accounts for getting on for half the retail broadband market it might normally expect to get a lower wholesale price than smaller competitors. In effect, you can interpret Spark’s complaint as it doesn’t like facing its competition on a level playing field.
This is all the more odd, because some parts of Spark are hurtling towards the fibre era with gusto.
In the company’s media statement, Chorus CEO Kate McKenzie says fibre broadband demand has been rapidly increasing. She says: “…even more so now as more content moves online and New Zealanders prepare to live stream the Rugby World Cup and other sporting events in 2019. The irony here is that Spark is starting to dominate streaming sport. Presumably the margins on Spark are ‘acceptable’ for the company. But they wouldn’t be achievable without ubiquitous fibre.
Chorus hits half million fibre connection milestone was first posted at billbennett.co.nz.
Bill Bennett edits The Download magazine for Chorus. He also writes a weekly telecommunications newsletter. That doesn’t mean he wrote this post On Chorus’ behalf, nor does it necessarily reflects the company’s option, although it might. It’s all my own work, blame him if you don’t like it.