Backdating of payments for Chorus unlikely

20:21, Feb 11 2014

Chorus can't expect big backdated payments from internet providers even if a review eventually raises the price it is able to charge for access to its copper network, according to a legal opinion obtained by InternetNZ.

However, the reverse would not apply; internet providers could expect refunds from Chorus if the review resulted in the Commerce Commission cutting Chorus' wholesale prices still further, law firm Lowndes Associates said.

The opinion may embolden internet providers in their stoush with Chorus over copper broadband pricing, in which tens or even hundreds of millions of dollars may be at stake.
Chorus would not comment on the legal opinion.

The price Chorus will be able to charge for a copper phone line and broadband connection is due to fall by 23 per cent to $34.44 a month in December, but Chorus has demanded the commission review that price by modelling its costs in providing the two services.

The competition watchdog hopes to wrap up the "full price principle" review of copper broadband connections (UBA) by December. But it has not set a deadline for the more complex review of copper line pricing (UCLL) which it has warned could take years to complete.

Legal uncertainty over whether the reviewed prices should then be backdated to December threatens to be a pall hanging over the industry for even longer, if it is dragged through the courts. But it is also one which could force Chorus, internet providers and regulators back to the negotiating table. Chorus last year rejected an industry proposal that the combined wholesale price be set at $37.50, prior to the commission finalising the December price cuts.

InternetNZ chief executive Jordan Carter said backdating FPP pricing would create "untold problems and uncertainty for everyone, but particularly for Chorus". The non-profit society has made a submission to the Commerce Commission on the UCLL review, based on the legal opinion provided by Lowndes, he said.

Lowdnes principal Simon Haines said internet providers were not at risk of having to make large backdated payments because they only had to pay for services that had first been invoiced by Chorus, and the company was not allow to bill them for services provided more than 100 days prior.

"This combination of clauses raises a hard stop against Chorus being able to backdate beyond 100 days on a commercial basis." In any case there was no rule against Chorus pricing services below the regulated price, he said.

InternetNZ spokesman David Cormack acknowledged Lowndes' advice was "only an opinion" and Carter held out an olive branch of sorts to Chorus. If Chorus withdrew its applications for FPP reviews of the December prices, the industry might "lend a hand" by supporting any government initiatives to more quickly transition homes to ultrafast broadband, he said.

Carter said 2013 had been dogged by "deals being attempted behind closed doors", poor decisions being reached because of insufficient consultation with affected parties, increased uncertainty created in the name of providing certainty, individuals "crying wolf", and issues being elevated to the courts and "the court of public opinion". He called for a "new beginning" this year.

One analyst said there had been ''bloody-mindedness'' on all sides.Chorus would not comment.

Spokeswoman Elissa Downey said the company would make its views known directly to the commission.

Submissions on the UCLL review process are due on Friday and on the UBA review a week later.


Fairfax Media