Chorus copper decision has mixed implications

TOM PULLAR-STRECKER
Last updated 16:49 09/07/2014

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The latest development in the saga of the price Chorus should be allowed to charge for access to its copper network has positives and negatives for the firm, a broker says.

The Commerce Commission set out today how it was likely to calculate Chorus' wholesale prices.

Broker Forsyth Barr said the consultation document had mixed implications, and although it answered some questions it provided no clarity on where regulated pricing would land.

Chorus' shares plunged last year after a ruling suggested a 23 per cent cut in the combined price Chorus would be able to charge for a copper phone line and broadband connection from December.

That raised fears, which have only partially subsided, that the company might not be able to fund the construction of its 69 per cent share of the ultrafast broadband network.

The commission said today that its preliminary view was that it would base the wholesale price of copper phone lines on the investment Chorus would have to make to replace that network with fibre-optic lines and to provide a fixed-wireless phone service in remote parts of the country.

But the competition watchdog intends to base the price Chorus will be allowed to charge for copper broadband connections on Chorus' costs.

In both cases it will take into account how Chorus' costs could be lowered by using third-party infrastructure.

Forsyth Barr analyst Blair Galpin said that amounted to a mixed bag for Chorus' investors.

The likelihood that the regulator would use a replacement fibre network as a proxy for the value of the copper lines network was positive for Chorus, but the commission's decision to consider the cost of alternative wireless connections in its calculations for remote areas was not, he said.

Galpin said industry feedback was that the commission's proposals contained wins and losses for Chorus and would not help anyone estimate what prices the regulator would finalise.

Chorus shares were down 1.5 cents at $1.715 in late afternoon trading.

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- The Dominion Post

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