Spark NZ to ComCom… Rethink Chorus wholesale charges

International experts calculate proposed charges could be at least $12 a month higher than they should be…

Industry input costs – which influence the retail prices for broadband services and landline phones - may be at least $12 a month more per customer than they should be if the Commerce Commission goes ahead with proposed new charges for access to the Chorus copper wholesale network.

That’s the view of Spark New Zealand, who releasing a submission today, has called for the Commission to rework its numbers and consult further with industry players before it finalises the new charges later this year.

General Manager of Regulatory Affairs John Wesley-Smith said Spark New Zealand believed the large increases in wholesale charges proposed by the Commission in a draft decision published last December were “unnecessary and should be reversed” when the Commission sets the final charges later this year.

Wesley-Smith said the Commerce Commission’s primary duty is to protect consumers against high prices in monopoly markets like the Chorus network where there is no competition.

Wesley-Smith said it is meant to do this by regulating Chorus charges based on what it would cost to replace the Chorus copper network today, using the most efficient combination of modern technologies.

However, the Commission’s first attempt at modelling this cost had come up with a proposed charge for landline access (required for broadband and/or voice services, and known as the UCLL Price) that was 80% higher than the median price in 14 other comparable countries – and 60% higher than the next most expensive country.

“This is not because of any New Zealand specific factors – it does not cost 80% more to provide landline access in New Zealand than everywhere else on a like for like basis,” Wesley-Smith said.

“This is the result of choices made in the draft modelling, and in a number of cases we think there are better choices it could make that avoid this significant divergence from international prices.

“Our experts’ analysis shows that the Commission’s draft model loads an enormous amount of unnecessary costs onto New Zealand consumers.

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