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User group welcomes Chorus result

MATT NIPPERT
Last updated 05:00 09/04/2014

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Chorus' courtroom defeat over Commerce Commission-mandated price cuts for access to its copper network may spell more certainty for investors and lower prices for consumers, analysts say.

Chorus had gone to the High Court at Wellington to argue the Commission had erred in law when deciding the company could charge only $10.92 a month for copper broadband connections, down from $21.96.

Yesterday Justice Stephen Kos dismissed Chorus' claim.

"Despite the combined intelligence and force with which Chorus' submissions were delivered, I am left unpersuaded that the commission erred in law," he said in a written judgment.

"In my view, the commission has done just as Parliament had prescribed."

Forsyth Barr analyst Blair Galpin said the court defeat was not unexpected and gave more certainty to the pricing process.

"Maybe a few people were expecting a positive result, but we hadn't factored it in," Galpin said."At best it would have been a temporary victory, and if they had won the process would have had to restart."

Chorus shares were changing hands for $1.76 on the sharemarket yesterday, only 1.4 per cent down on opening.

Galpin said regulatory uncertainty had weighed on Chorus in the past year, halving the company's market capitalisation.

An announcement by the Commission that final pricing decisions on the copper network and unbundled broadband would be made in December was a positive step, he said.

"For end users and the market, certainly the sooner we know the better."

Consumer group the Telecommunications Users Association of New Zealand (Tuanz) welcomed the High Court ruling and said it should eventually deliver lower retail prices.

"It's a very small step during the journey but an important one. We're a step closer to price reductions we've been expecting for three years," chief executive Paul Brislen said.

In the three-day hearing in the High Court last month, Chorus claimed the commission had taken a "mechanical approach" rather than following an evidence-based decision-making process and had therefore erred in law when cutting prices.

Chorus' main argument was that pricing comparisons with Sweden and Denmark resulted in an overly narrow consideration of possible prices.

In a statement to the NZX, Chorus said the judgment would result in the status quo prevailing and it was weighing up whether to exercise its right of appeal.

Telecommunications Commissioner Stephen Gale said he now hoped to be able to complete the pricing review by December, though Brislen thought it would more likely be mid next year.

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