Chorus hit as regulator moves to cut copper broadband prices

Chorus’ share price dropped 14 percent when the Commerce Commission released its draft determination on wholesale copper broadband and phone line prices. The new pricing applies under the UCLL (Unbundled Copper Local Loop)and UBA (Unbundled Bitstream Access) regimes.

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, ISPs argued the price cuts didn’t go far enough. The NBR reported comments from Callplus CEO Mark Callander, who described the proposals as disappointing. Kordia’s Scott Bartlett warned that holding copper prices artificially high would damage investment in new technologies.

Prime Minister not ruling out legislation

The spat reached government, with Prime Minister John Key saying he wasn’t ruling out legislation to get the outcome the government wanted. Remember the fibre network project was originally put in place by Key in his first term as PM.

Meanwhile Labour’s communications spokesperson Clare Curran made the same point as the ISPs: that holding copper prices high will stifle innovation and investment.

t was a tough call made tougher because Chorus both owns the copper network and wants to maximise the return on that investment while also encouraging customers on to the UFB fibre network it is building. Chorus has the lion’s share of the network contracts.

Regulated prices can influence customer decisions

There’s a fear that customers need to be bribed or otherwise nudged to get them to move from copper to fibre.  New Zealand's difficult copper fibre conflict says: 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?