Chorus financial plan in tatters

Last updated 11:45 04/09/2014

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One of the ideas Chorus has come up with to try and shore up its finances appears to be in tatters.

The network company was dealt a blow today after the Commerce Commission released legal advice that said the company's plan to charge extra for better copper broadband products could break the law.

Chorus has been seeking extra revenue to help close a $1 billion funding gap which may be caused by cuts to regulated prices that are due to take effect in December.

Part of its plan to cushion the impact of the price cuts involves capping the shared bandwidth available to internet users on its existing regulated copper-broadband plans and introducing new "premium" broadband plans called Boost, the price of which would not be set by the regulator.

However, a legal opinion sought by the Commerce Commission from David Laurenson QC and James Every-Palmer, said the plan would breach Chorus' obligations under the Telecommunications Act to act in "good faith".

In part that was because Chorus' regulated copper broadband service would become progressively less competitive versus its premium Boost services over time, defeating the purpose of the regulation, they said.  

Spark objected to Chorus' proposal in July, saying Chorus' "artificial cap" amounted to a "significant degradation" of broadband services. But Chorus countered it was common practice for network operators to provision a set-amount of bandwidth per user.

As its proposed cap was set "slightly above the average throughput that people see on the network today", it was not proposing to "take anything away" from anyone, Chorus said.

The commission is seeking public feedback on the legal opinion by September 18.

Chorus spokesman Brett Jackson said this morning that it was still assessing the legal opinion but believed it was "inconsistent with the regulatory guidance that is available".

"It continues to highlight the complexity of today's regulatory environment and seems to make it harder for Chorus to deliver better broadband performance and more choice to internet providers and their end users," he said.

Chorus shares were trading down one cent at $1.77 in late morning trading.

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