Kiwi broadband users face being taxed at least $600 million by the Government, with all proceeds going to privately owned Chorus, a broad coalition says.
The impact of Communications Minister Amy Adams' proposals for reform of existing internet connections will be a transfer of $600m to Chorus, the coalition for fair internet pricing says.
It based its estimate on research it commissioned from economic research company Covec.
This afternoon the coalition launched the "Axe the copper tax" campaign.
It is being led publicly by Consumer New Zealand chief executive Sue Chetwin, InternetNZ chief executive Jordan Carter and Paul Brislen, chief executive of the Telecommunications Users Association of New Zealand (Tuanz).
Other members include the Federation of Maori Authorities, Grey Power, the the New Zealand Union of Students' Associations, Rural Women and the Unite union.
Kiwiblog, run by David Farrar, the head of the National Party's polling company, is also a member.
"This is a story of the Government planning a new $600m tax on Kiwi broadband customers to unfairly boost the profits of Chorus, a private monopoly, that last year made a profit of $171m," Chetwin said at the campaign launch in Wellington.
"There will be no benefit to any Kiwi consumer from the new $600m tax," Chetwin said.
"This $600m tax follows lobbying by Chorus, which is building part of a new internet network that 70 per cent of Kiwis won't use this decade - and that a quarter of us will never have access to. No rural users ever will."
As part of the agreement to split Telecom from Chorus, a condition of its winning the ultrafast broadband (UFB) contract, there was a commitment to review the price at which it could charge broadband users to connect to the old copper-based network.
In December, the Commerce Commission said the price should be slashed by 25 per cent, a decision which if implemented, would cut Chorus' revenues by an estimated $160m a year.
On the same day Chorus warned the proposals could affect its ability to fund the rollout of the ultrafast broadband network, for which it is receiving a government subsidy of more than $900m.
Also on the same day as the announcement, Prime Minister John Key said he would not rule out fresh legislation to overcome a decision he said was "problematic".
In April, Adams proposed delaying the reform by a year, and proposed a smaller cut in pricing to that proposed by the commission.
The $600m figure used by the coalition is derived from the difference between the commission's proposals and those of Adams.
Part of the justification for the higher price is the risk that cutting the price of copper-based broadband will make the step up to UFB too great and mean fewer users will switch to it.
Chetwin said today that this was unfair on the roughly 1 million Kiwis who will never have access to it, but will pay the "tax" anyway.
The coalition insisted that it supports the UFB project, but wants the "tax" scrapped.
It also takes exception with the decision on monopoly pricing being determined by Cabinet, rather than the Commerce Commission.
"We haven't seen anything like this since the 1970s and we think it is dangerous."
Adams has attacked the campaign, claiming it is based on ''misinformation'' in a post on Twitter, without being specific.
In a statement she said consumers were getting cheaper broadband and a new network.
"At the same time as we are giving New Zealanders cheaper copper broadband, we are also building a world-class ultra-fast broadband network. It's the best of both worlds for Kiwis."
The question, Adams said, was the pricing framework to be used for the transition between the two networks. The prices proposed in her discussion document would apply until 2020.
"We need to acknowledge that the Commerce Commission's price-setting processes are still continuing and are also subject to appeal. This could lead to two or three years of litigation at a time when investors, retail providers and consumers are seeking certainty," she said.
"While I acknowledge there are some concerns with the Government's proposal, it is important to remember that we are going through a period of consultation and I am keen for feedback."
Chorus is due to give a submission on the Government's proposals, with the deadline tomorrow, but a spokesman said it was "not ready" and could not be released today.
In a statement, the company noted that the price proposed by the Commerce Commission had never been implemented.
"Describing this as a 'new tax' is clearly misleading and incorrect," Chorus said.
Chief executive Mark Ratcliffe said New Zealand was about 20 per cent of the way through the UFB project, which would deliver social and economic benefits.
"Given the many benefits of this initiative, it is important that the economics of the project remain in place for the Government's partners, that investment is supported throughout the duration of the build and the transition to fibre is supported so consumers get savings and wider benefits," he said.
Labour finance spokesman David Parker said the "copper tax" was "welfare for corporates".
"The Government makes a big song and dance about clamping down on beneficiaries, but under National the biggest beneficiaries are the likes of Chorus, Rio Tinto and SkyCity," he said.
- © Fairfax NZ News
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