Chorus keeps own counsel - for now

TOM PULLAR-STRECKER
Last updated 14:42 05/12/2012

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Chorus has shied away from immediately critiquing the Commerce Commission's draft ruling that it should only be allowed to charge $8.93 a month for wholesale copper broadband connections.

Spokeswoman Melanie Marshall said it instead planned go through the commission's channels and make "a strong submission". 

Chorus has indicated it would find the price hard to swallow, estimating it would knock up to $160 million off its annual operating earnings, and has claimed it might undermine the switch to fibre-optic ultrafast broadband. But it has not so far claimed the commission got its calculations wrong.

Prime Minister John Key has not ruled out coming to Chorus' aid by intervening with new legislation, after describing the proposed price as "very problematic". 

The draft price determination, which helped send Chorus' shares tumbling 19 per cent after it was first unveiled by Telecommunications Commissioner Stephen Gale on Monday, was based on the commission's estimate of the cost of similar wholesale services in just two countries - Denmark and Sweden.

The commission ruled out another otherwise comparable country - Belgium - from its benchmarking exercise because of network differences but it suggested its example might support an even lower price.  

Gale said it was the commission's "very first estimate" and the next step would be for Chorus to explain what it thought would come out of the price review.

Chorus' ultimately has the right to demand a price based on actual costs, rather than international benchmarking.

Wholesale broadband should not be hard to price, Gale said, given the recent investments many telecommunications firms had made in unbundling.

The new price would take effect from December 2014. Submissions on the draft determination close in February and the commission may hold a conference with interested parties in March before finalising its ruling in June - in the absence of any government rule change.

Chorus' share price stabilised today, trading up 7 cents at $2.85 in mid-afternoon trading.

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- BusinessDay.co.nz

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