Axe the Tax group 'hopeful' after Key comment

Last updated 15:37 03/10/2013

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An internet pricing group has welcomed a Government decision to wait for a Commerce Commission ruling before deciding whether to legislate the price of copper broadband services.

The Coalition for Fair Internet Pricing says a statement by Prime Minister John Key that the Government would wait for the commission's ruling this month before deciding its next move was an "early sign of progress".

Coalition spokeswoman Sue Chetwin, who is also chief executive of Consumer NZ, said the group was pleased Key had "desisted from claiming copper network monopolist Chorus 'could go broke'," without legislation.

The coalition is behind the "Axe the Tax " campaign, which would prefer that the job of price-setting was left to the Commerce Commission.

Key said the Government would wait for the commission's "final ruling" on the price of copper broadband connections before deciding on its next move. The comment was reported by Fairfax Media this morning.

The coalition said in a statement this afternoon that the Commerce Commission would need to be able to demonstrate its final ruling had been arrived at "correctly and free of political interference".

"As long as it is able to demonstrate it has not been influenced by political pressure, and has correctly followed the required processes, we are hopeful this matter can be resolved in a way that benefits all users of telecommunications services," Chetwin said.

She called on the Government to withdraw its discussion document, which canvassed the options for legislation, and "discontinue its parallel ministerial consultation process on copper pricing".

Communications Minister Amy Adams issued a discussion paper in August proposing the wholesale price of a copper phone line and broadband connection be fixed at between $37.50 and $42.50 a month.

But IDC Research analyst Glen Saunders said his "gut feeling" was the Government would only intervene if the commission's final determination left a big difference between the wholesale price of copper broadband and entry-level ultrafast broadband pricing.

"It would obviously be a much better outcome for them if they could leave it alone," he said.

The Government began considering intervention in the broadband market after the Commerce Commission issued a draft ruling in December that, if ratified, would have set the combined wholesale price of a copper line and broadband connection at $32.45, down from $44.98 today.

Key and Adams expressed concerns that pricing could undermine Chorus' ability to fulfil its contract to build its share of the ultrafast broadband (UFB) network and could dissuade consumers from switching from copper to UFB.

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But four days after Adams released her discussion paper in August, the commission signalled it would not impose such a deep wholesale price cut when it finalised its determination this month.

Telecommunications Commissioner Stephen Gale would not comment on whether the final determination might be a only a few dollars higher than the draft price, or more.

The commission has already ruled Chorus should be allowed to charge $23.52 a month for a copper phone line. Its draft determination was that broadband connections should wholesale for $8.93, but if it finalises the price at anything above $13.97, that would bring the combined price into the band considered by the Government in its August discussion paper.

Chorus would have the right to challenge the commission's "final" determinations and seek a higher wholesale price if the Government shelved its proposed legislation.

The company has in fact already issued such a challenge, asking for the commission to carry out a "full price principle" (FPP) review.

An FPP review would mean regulated pricing would be based on the commission's calculation of the cost of Chorus building a replacement fixed-line network, rather than on international benchmarking, which has been the tool it has used in its determinations to date.

Adams said an FPP review would see the commission apply essentially the same principle the Government had used to come up with the pricing in its August discussion paper.

That was to set wholesale copper pricing at the same level that Chorus can charge for entry-level products on the new UFB network.

- The Dominion Post


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