Chorus wants December pricing deadline

TOM PULLAR-STRECKER
Last updated 11:31 17/02/2014

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Chorus says it should be possible for the Commerce Commission to review the price it should be able to charge for its copper phone lines by December.

However, the trade-offs it has suggested in return for quicker certainty would appear likely to result in higher access prices and appear unlikely to find favour with internet providers or the regulator.

The commission needs to base wholesale pricing on what it would cost to replicate the services provided by its copper network. In a submission to the commission, Chorus suggested the competition watchdog should do the modelling by calculating what it would cost for Chorus to replace its existing network assets in their current configuration.

Chorus said the approach would mean the commission and the industry could "avoid lengthy
debates over how a more theoretical copper network would be designed and built".

The commission appears to have already rejected the approach put forward by Chorus, suggesting in a discussion paper that if equivalent phone services could be provided more cheaply in rural areas using wireless technology, it should take that into account when deciding what prices Chorus should be allowed to charge.

The commission said earlier this month that it hoped to wrap-up a review of the price Chorus could charge for its copper broadband connections by December, but has cautioned modelling the cost of the copper access network itself could take years.

New lower wholesale prices for broadband connections and copper lines, based on international benchmarking, are due to come into effect in December, however Chorus has demanded they be reviewed.
It not clear whether the prices would need to be backdated to December once the reviews are completed, which has cast a pall of uncertainty over the industry.   

Chorus said it expected the reviews would result in an increase in the price it would be allowed to charge for its copper network, when compared with the new lower pricing that is due to take effect from December.

It said a 2006 Appeal Court decision made it clear the reviewed pricing would need to be backdated to December this year, if the reviews had not been completed by then.  

InternetNZ released a legal opinion from Lowndes Associates last week that said the reviewed pricing could not be backdated, in the event of a price rise, because of the contractual conditions Chorus had with internet providers.

But Chorus said in its submission to the commission that Lowndes' opinion missed the point of the appeal court ruling. Chorus acknowledged uncertainty over regulated pricing and backdating was at "great height", but it suggested companies that paid to use its network should make allowances for the possibly they might need to make retrospective payments to Chorus.

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"Contingencies are a normal part of commercial activity and financial reporting," it said. 

- Fairfax Media

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