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Telecom lays complaint over copper network

TOM PULLAR-STRECKER
Last updated 14:12 22/07/2014

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Chorus has returned fire over a complaint Telecom laid with the Commerce Commission over a new copper broadband product.

Telecom said Chorus planned to impose an "artificial cap" of 250 kilobits-per-second on the average throughput of its regulated copper broadband service in order to make new "premium" products it announced in May more attractive.

Telecom said the move would significantly degrade the performance of regulated copper broadband services, the price of which is set by the Commerce Commission.

It has laid a complaint against Chorus, saying the proposals breached the Telecommunications Act and were also a "breach of good faith".

The commission said it would investigate the complaint and revealed CallPlus had also voiced concerns about Chorus' changes.

Chorus spokesman Ian Bonnar said 250kbps was "slightly above the average throughput that people see on the network today" so Chorus was not proposing to "take anything away" from anyone.

The throughput measure was not the same as peak line speed, which would be higher, but instead recorded how much bandwidth Chorus had available on its network per connection.

Chorus' move would ensure existing regulated copper broadband services "remained fit for purpose" at about today's observed levels, while it introduced its premium products for customers who wanted guaranteed performance, he said.

The row is the first major public dispute between Telecom and Chorus since Chorus was spun off from the telecommunications giant in 2011.

Telecom spokesman Andrew Pirie believed the overlap in shareholders in both Telecom and Chorus' was now "quite low" but said that in any case, Telecom could not have any regard for the fact some Telecom shareholders might still own shares in Chorus.

InternetNZ appeared to come down on Telecom's side, saying in a submission to the commission that Chorus appeared to be trying to "undermine the regulatory foundation" of the broadband market.

The dispute dates back to May when Chorus said it would wholesale new premium products including a "Boost HD" copper service that would provide sufficient bandwidth to guarantee customers would be able to watch a high definition video stream.

The new products are designed to ring-fence some of Chorus' copper network revenues from the possible future effects of regulation.

Although the unregulated service was to be offered at the same price as Chorus' existing regulated service for now - $44.98 a month with a phone line included - Chorus did not promise it would cut that price when the regulated price of a copper broadband connection and phone line falls to $34.44 in December.

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Pirie said Telecom was happy with Chorus' existing regulated service and the new premium service would only be attractive if Chorus "degraded" the quality of its regulated product, which is what it has accused Chorus of planning.

Chorus countered in a statement released to the NZX that it believed it was "over-delivering" on its present obligations with its regulated service and denied it was contemplating a significant degradation of that service.

Bonnar said provisioning a set amount of bandwidth-per-user was "standard practice" for network providers and the throughput of its network wouldn't necessarily increase if the commission torpedoed its plan.

"The case for continuing to invest is harder at $34.44," he said.

"We hope it doesn't come to that."

If the regulator felt the need to increase the 250kbps cap in future, it had the means to do that, he said.

Chorus believed that the guaranteed end-user performance of its Boost services would facilitate competition and innovation and that they were in the interests of end users, the company said.

Chorus shares were down half-a-cent at $1.67 in lunchtime trading on the NZX, while Telecom shares were down 1c at $2.835.

Bonnar said Chorus had no way of knowing how many Chorus shareholders also owned shares in Telecom but agreed with Pirie that the overlap was probably low. He noted there had been considerable trading in Chorus shares on the back of regulatory uncertainty and that the companies were in different indices on the NZX so would be treated differently by passive funds.

The commission said today that it was continuing to assess whether Chorus' proposed new unregulated services were materially different from the regulated ones and could be priced separately. That regulatory process would run in parallel to the investigation it announced today.

- Stuff

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