Enable targets 8pc after-tax gain
Christchurch broadband company Enable Services, owned by the Christchurch City Council, says it needs an average of $50.50 a month per connection for a decent profit.
Enable is investing in a $450 million joint venture with the Crown to build a fibre network in Christchurch over eight years.
It is more than two years into that and expects to complete the network by the end of 2019.
Enable told the Ministry of Business, Innovation and Employment in a submission that an average wholesale price of $50.50 a month was needed to make an 8 per cent after-tax return on investment.
That was above the range suggested by the ministry of $37.50 to $42.50.
Enable does not sell directly to households. It sells to Telecom, Snap and other retail telecommunications companies who sell broadband services to households.
Enable said the range of prices for residential consumers from a fibre network could generally be grouped into five mass-market products ranging in price from $37.50 to $58.75 a month, giving an average of about $50.50 in order to achieve the 8 per cent after-tax return on investment.
The $50.50 monthly average also included higher-priced products, Enable said.
Enable chief executive Steve Fuller said yesterday that fibre prices were not regulated but Enable was making its views on pricing known to the ministry for if they were in future.
The prices Enable charged were capped under a 10-year agreement with its joint venture partner Crown Fibre Holdings, he said.
It also sold other premium-priced connections greater than $300 a month and some greater than $1000 a month, he said.
The industry has been in deep debate over the Commerce Commission's proposal that the price for copper-based broadband charged by big company Chorus should fall by half from December this year.
Industry players say if copper broadband is too low it will dissuade consumers from switching to the superfast broadband provided by fibre networks.
Fuller said that debate was not affecting Enable. Enable knew the review of copper broadband prices was going to happen and had factored it into its business case.
Asked if Enable still had a good business case, Fuller said, "We believe so. It's not to say it's an easy business."
The company was focused on an efficient rollout of fibre and getting as many higher-value customers as possible. Price was only a component of the customer's decision. Speed, reliability and ease of setup were all factors in customers' choices.
Fuller said copper was a sunset technology with only a certain amount of capability and in four to five years it would start to struggle to meet customers' expectations.
The debate around Chorus' copper broadband prices was a short-term issue, he said.