Business Desk reported that Telecommunications network operator Chorus saw its shares plunge 12% at the open of NZX trading following a Commerce Commission a draft decision that would steeply cut what it can charge for access to electronic switchgear used over its ageing copper lines network.
That was in spite of winning some pushback on pricing for the actual lines. The shares plunged 12% or 40 cents to USD 3, the lowest since June 21 after the competition regulator released a final determination on unbundled copper local loop and a draft regime for unbundled bitstream access conceding ground on the regime for copper while signalling a sharp cut to UBA pricing.
The regulator set the new UCLL rates at a geographically averaged price of USD 23.52 per month per line from December 1st 2014, a 3.9% reduction to the prices set in 2007. Urban UCLL prices have been set at USD 19.08 and rural at USD 35.20 effective immediately. UBA prices will be provisionally set at USD 32.45 per month effective from December 1st 2014 from the existing USD 44.98.
Mr Stephen Gale Telecommunications Commissioner said that the UBA decision was a draft ruling only, with limited international comparisons and will go out for consultation with a final decision likely in June. If telecommunications companies are unhappy with the final benchmark, they can request the regulator use a cost modelling approach to determine pricing instead. This UBA price when finally decided in two years may have a significant impact on Chorus' revenue.
Mr Amy Adams Telecommunications Minister signalled immediate disquiet saying that the government is reviewing the draft determination which is potentially significant for the industry and end users. New Zealand is one of the few countries in the world to have structurally separated its main telecommunications company, while at the same time rolling out a fiber network. This potentially highlights the need for a pricing methodology appropriate for the New Zealand context.
Chorus said that it is reviewing the potential impact of the announcement and it has very serious concerns about the effect of these decisions. The draft UBA prices would lead to a very material revenue reduction and cause much cheaper copper services which would dramatically slow migration to UFB services.
Among concerns is the potential for much lower copper network pricing to deter investment and uptake of ultra fast broadband, using the government subsidized fibre network being laid throughout the country.
The UCLL service lets telecommunication companies use the copper network between an exchange and an end user's premises to offer their own voice and broadband services. UBA gives access to Chorus's electronics software and transport over the network, meaning telcos don't have to build their own.
Chorus was spun out from Telecom as a separately listed company last year to free up the telecommunications company from its regulatory burden and allow the network operator to successfully win a billion dollar subsidy to build a nationwide fibre network and rural broadband system.
Some 80% of the network company's revenue is still derived from the ageing copper network and is subject to the Commerce Commission's pricing review.
Mr Gale said that he didn't expect the draft UBA regime to deter unbundling of exchanges and gives enough lead in time for firms to recover their cost of investment.