Regulator's pricing draws threat from NZ gov't Internet partner
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E-mail Xinhua, November 5, 2013
The New Zealand government's key infrastructure project of ultra-fast broadband (UFB) was in disarray Tuesday with the major partner in laying the fiber optic cables saying price-setting by the anti-trust commission had endangered funding.
The Commerce Commission announced it was setting a price of 34. 44 NZ dollars (28.49 U.S. dollars) per user line per month on the older copper network, but network monopoly Chorus claimed this price would fatally undercut uptake of the new UFB service.
Telecommunications commissioner Stephen Gale said in a statement that the commission was endeavoring to promote competition while taking into account incentives to invest in new services such as UFB.
However, Chorus called on the government to intervene by over- ruling the price change before it took effect on Dec. 1 next year, when the price per line would be cut from 44.98 NZ dollars.
The price cut would lead to a funding shortfall of 1 billion NZ dollars by 2020, reflecting a loss of cash flow, reduced borrowing capacity and increased financing costs.
"Without the proposed government intervention, the loss of these revenues would have two very negative consequences for Chorus' funding ability," Chorus CEO Mark Ratcliffe said in statement.
"We would have much less cash every year to invest and we simply will not be able to borrow the sums of money we need to make up to a 3 billion NZ dollar investment in UFB."
The company's lenders would be entitled to trigger a default on its borrowing arrangements and it would have to discuss with the government whether it was "still a credible UFB partner."
Communications and Information Technology Minister Amy Adams issued a brief statement saying the government would "consider its options in detail before making any further decisions."
The government, which is contributing 1.35 billion NZ dollars to the UFB project, had previously indicated it might intervene to help Chorus, but this sparked a nationwide protest, with critics labelling the higher price a "copper tax" that would funnel millions of dollars to Chorus.
Other ISP companies have joined the criticism and said they would pass the price cut on to consumers.
The main protest group, the Coalition for Fair Internet Pricing, said the claims by Chorus beggared belief, given that the price cut would amount to a total impact of 104 million NZ dollars a year on "Chorus' monopoly revenues" of 1.06 billion NZ dollars last year.
"Chorus is crying wolf, and the government should simply tell it to accept this morning's decision, make whatever minor adjustments are needed to respond to it, and get on with meeting its contract to build UFB for the 30 percent of New Zealanders who are believed to want it by 2020, and the 75 percent of New Zealanders who will eventually have access to it," spokesman Paul Brislen said in a statement.
The main opposition Labour and Green parties called on the government to respect the decision of the independent Commerce Commission, saying the poor uptake of UFB was a result of the government's failure to stimulate a multi-provider on-line content environment. Endi
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