Adams mum on broadband intervention

TOM PULLAR-STRECKER
Last updated 10:14 13/12/2012

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Communications Minister Adams has declined to shed light on whether the Government is considering intervening over broadband pricing because of concerns about copper-based competition to ultrafast broadband, or Chorus' ability to fund the UFB roll out.

Adams said claims that consumers would lose out if the Government overruled a Commerce Commission move to drop the wholesale price of copper broadband connections by as much as $12.53 a month were exaggerated.

It "was highly unlikely that retail service providers would fully pass through any wholesale cost savings", she said.

Labour communications spokeswoman Clare Curran said on Monday 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.

She said the claim any cut would probably not be passed on in full either gave the green light to telcos to hold prices up or was misleading the public.

"Either way she is letting Kiwis down. We need a minister whose priority is lower costs for customers, not one that would intervene in an independent regulator's decision to reduce prices."

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".

Adams would not say whether the Government was 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 was worried Chorus might not be able to live up to its obligations to build 70 per cent of the UFB network if the cuts went through as drafted.

Asked which was the concern, or whether it was a combination or something else that was behind the possibility of legislation, Adams said she had "nothing further to add".

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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".

- BusinessDay.co.nz

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