Broadband savings 'unlikely' to be passed on

TOM PULLAR-STRECKER
Last updated 11:37 12/12/2012

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Claims that consumers will lose out if the Government overrules a Commerce Commission move to drop the wholesale price of copper broadband connections by as much as $12.53 a month are exaggerated, Communications Minister Amy Adams says.

Adams said it "was highly unlikely that retail service providers would fully pass through any wholesale cost savings".

Labour communications spokeswoman Clare Curran said yesterday that Prime Minister John Key was putting the interests of network company Chorus above those of consumers by threatening to legislate against the proposed price decrease.

The cut in the price Chorus could charge for wholesale broadband connections, from $21.46 to $8.93 a month, was mooted last week in a draft report that telecommunications commissioner Stephen Gale has described as "very preliminary".

The commission is due to finalise the report in June and any cut would apply from December 2014.

"With so many families struggling under National's failing economy any monthly saving provides real help, but National won't even give them that," Curran said.

Adams said regardless of the extent to which wholesale price cuts might be passed on, "the long-term benefits of end-users involves consideration of not just price but the ability to access enhanced speeds and services, and the Government will be considering the impact in respect of all these matters".

It has not yet been made clear whether the Government is primarily concerned copper-broadband price cuts would dissuade people switching to the alternative fibre-optic ultrafast broadband (UFB) network, to which the Crown is contributing $1.35 billion, or whether it is worried Chorus might not be able to live up to its obligations to build 70 per cent of the UFB network if the cuts go through as drafted.

Chorus has said the combined effect of the draft ruling and a final determination concerning the price it can charge for its copper phone lines would be to cut $170 million to $180m off its earnings before interest, tax, depreciation and amortisation, which last year came in at an annualised $680m.

Key has said he is concerned the draft cuts would reduce "its capacity around broadband".

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