Chorus case: Errors in law alleged

Last updated 05:00 18/03/2014

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Chorus has kicked off its legal challenge against copper broadband price cuts in the High Court at Wellington.

Appearing for the company, David Goddard, QC, said the Commerce Commission made several errors in law last year when it decided to slash the price Chorus will be able to charge for copper broadband connections from December from $21.46 a month to just $10.92.

The commission looked at regulated prices in Denmark ($8.91) and Sweden ($10.92) but took a "mechanical approach" rather than using those prices as part of a rational, "evidence-based" decision-making process, he said.

In particular, it had failed to consider whether setting a price above that in Sweden might have given best effect to the section of the Telecommunications Act which required it to consider investors' incentives to innovate in new telecommunications services, he said.

"The commission didn't at any stage pause to ask itself what, if anything, the two benchmarked prices established about the likely cost of providing the service in New Zealand."

The "massive" price cuts proposed by the commission would obviously affect Chorus' and others' ability and appetite to invest, Goddard said.

"The more dramatic the intervention, the more sure the commission needs to be that the reasons for it are clear."

Communications Minister Amy Adams has forecast the court case could be the first of many, lasting years, after her attempt to legislate over the commission's price cuts failed to find favour with National's coalition partners last year and was abandoned.

Many of the issues under debate at the High Court are subtle and nuanced. Within an hour of the hearing opening, Goddard and Judge Stephen Kos were debating how New Zealand might be placed in an international curling league as they searched for analogies that might shed light on the rights or wrongs of the commission's regulatory procedures.

In parallel with the legal appeal, Chorus has also applied to the commission for a "full price principle" (FPP) review of the regulated pricing for both copper broadband connections and phone lines themselves.

The commission, represented at the High Court by James Farmer QC, is due to put its case today.

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- BusinessDay


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