Millions hang on Commerce Commission calculations

In this edition:

• Friction as the Commerce Commission changes the way it calculates regulated returns.
• 2degrees picks up Now's business customers
• Spark offers data centre connectivity service.

Fibre companies dispute regulated returns model

The Commerce Commission is changing the way it calculates the return regulated infrastructure companies are allowed to earn. This week infrastructure companies, including Chorus and Enable Networks, submitted on the Commission’s technical consultation on matters relating to the tax-adjusted market risk premium (TAMRP).

One of the key arguments to emerge from the submissions is the question of how far back you should look when deciding what is a reasonable return. A core debate centres on historical data windows, specifically whether to look at market trends starting from 1931 or 1900.

While this sounds esoteric, in practice it can make a substantial difference to the profits fibre companies can earn.

Historic data

Along the way, the Commerce Commission plans to drop something known as the Siegel 1 estimator. This adjusts historical bond data to account for periods like 1940–1980, where high inflation unexpectedly drove real bond returns into negative territory.

Proponents of removing Siegel 1 argue that adjusting historical bond data assumes markets systematically misjudged inflation for decades, which conflicts with standard economic models that assume rational market expectations.

Another proposed change involves interest rate swap spreads. This is the difference between fixed swap rates and government bond yields. They have been removed as an indicator of stock market risk. Swap spreads primarily reflect banking-sector risk rather than broader corporate equity risk, making them an uninformative proxy for market risk.

While Chorus supports removing Siegel 1 and swap spreads, the fibre company strongly opposes using a 1931 start date for calculating total market returns under the remaining 'Siegel 2' model.

Difference runs to millions

Chorus argues that starting from 1900 yields a real total market return of 7.8 percent compared to 6 percent from 1931, artificially depressing allowed returns by roughly 90 basis points. That could cost Chorus around $50 million a year and other fibre companies around $10 million a year.

Like Chorus, Enable Networks supports removing Siegel 1.

The principles apply to other regulated infrastructure businesses. Transpower and NZ Airports Association both say they endorse moving toward clear, rule-based formulas over regulatory discretion to improve long-term predictability.

Critical submission

A submission from Capital Financial Consultants (Dr Martin Lally) is more critical. He is concerned that discarding foreign data and key estimators drastically reduces statistical reliability. Lally argues that historical bond yield distortions were driven by "bond market repression" (government coercion of bond buying), which artificially inflated historical equity estimates, making an adjustment like Siegel 1 necessary.

The Commerce Commission process leaves tens of millions of dollars hanging on statistical nuances. The affected companies won’t know exactly where they stand until the decision on the methodology is finalised.

Mercury moves Now business customers to 2degrees

Business customers of Napier-based ISP Now will move to 2degrees when the ISP closes at the end of November 2026.

Now was acquired by Mercury in 2022 and the new owner is moving around 15,000 residential customers to Mercury’s broadband business. This leaves around 3000 business customers, mainly in the Hawke's Bay region, who have broadband and mobile accounts.

Customers who want continuity will have their accounts moved to 2degrees under the agreement.

It’s a move that 2degrees CEO Mark Callander says will strengthen his company’s presence in key regional markets and support its continued growth in the business sector.

He says: “Now has built a strong customer base that includes many successful Kiwi businesses, many of them in regional communities where we already have a strong presence”.

Customers moving to 2degrees will keep their existing business plan pricing. 2degrees will contact customers directly with further information about their migration process, including timing and any applicable changes to terms and conditions.

Spark upgrades Auckland data centre connectivity

Spark Wholesale has launched a dedicated data centre interconnect (DCI) service. There are 10G, 100G and 400G services. In addition, Spark Wholesale says it will soon offer 800G between data centres in the Auckland region with coverage stretching from Silverdale to Papakura.

The company says this will offer customers “private uncontended connectivity”.

Spark Wholesale’s DCI service uses Ciena’s WaveLogic 6 Extreme (WL6e) 1.6 Tbps coherent technology and runs on the Waveserver system. The company is also using Ciena’s Navigator Network Control Suite to manage the network.

In other news...

• LG TVs caught spying even when offline or on standby — The Verge
  Privacy issues could make smart TVs a potential legal battleground.
• Labour looks at data centre energy rules — Interest
  Party says big data centres can pay their own way, find their own renewable energy and cover connection costs.
• Why Meta’s US$18b settlement matters — The Listener (paywall)
  Pressure on social media giant will bring change.

This time last year Spark revealed its SPK-30 strategy

The telco first talked publicly about its back-to-basics SPK-30 strategy at its 2025 annual result announcement. Spark then expanded on those plans in an investor communication.

At that time, the company told investors that it would from now on focus on delivering a better network and better customer experiences. When the company announced its 2026 annual result in August, there was some evidence the SPK-30 strategy is already having an effect on the company.

Five years ago: The first privacy compliance notice
The Reserve Bank received the New Zealand Privacy Commissioner’s first compliance notice following an online attack in December 2020.

Ten years ago: A first-hand look at the Great Firewall of China
It gives China’s internet a broken feel, but by 2016 the firewall was much more pronounced and pervasive than on an earlier trip in 2014.

Download Weekly is a New Zealand telecommunications industry newsletter written by Bill Bennett. You are welcome to pass it on to your friends and colleagues. While the newsletter is free, reader support helps enormously. A banner at the top of the page will take you to the support site.

Have your say. Sign up as a subscriber, it is free, to comment on any of the stories on this site. We don’t collect any personal data other than an email address.