The Commerce Commission has released its draft decision on the new regulatory regime for fibre broadband networks, to apply from 11 January 2022 until 31 December 20224.
The draft decision proposes a revenue cap on Chorus that will limit the prices consumers pay for broadband. It also imposes minimum standards on Chorus for availability and performance of its UFB services Chorus and the other local fibre companies (Northpower Fibre, Ultrafast Fibre, and Enable Networks) will also be required to publish details of key performance indications such as profits, quality of service and expenditure.
Chorus said the draft decision represented an improvement on the Commission’s Emerging Views paper, issued in May 2019 but “the implied WACC [weighted average cost of capital] rate for the period to FY22 is still below that required to ensure our cost of capital reflects a fair return to investors given the investment risks taken.”
At the company’s AGM last month, Chorus chair Patrick Strange warned the Commission that over-regulation of the UFB network could scare off much needed foreign investment in New Zealand infrastructure. He said international investors, including many that are Chorus shareholders, were watching the commission’s regulatory process very closely.
However, in August Moody’s Investor Services said the new regulatory framework would improve Chorus’ revenue predictability and stability and support the company’s credit profile because, in contrast to the current regime, price and revenue shocks would be unlikely.
The commission has published the draft decision along with two supporting documents: WACC calculations spreadsheet supporting its draft decision; Review of submissions on the Cost of Capital for Fibre network losses by Dr Martin Lally; Framework for promoting competition by Ingo Vogelsang and Martin Cave; Fact sheet – Regulation of fibre broadband networks.
The commission will publish its final decisions on the input methodologies in mid-2020 before setting the revenue cap and minimum quality standards for Chorus and the information disclosure regime for all providers in late 2021. Submissions to its draft decision are due by 28 January 2020.
• Chorus promises 8Gbps UFB services
Chorus has announced plans to offer fibre services at up to 8Gbps, symmetrical, XGS-PON technology. The new service, Hyperfibre, will be offered initially at 2Gbps and 4Gbps, and at 8Gbps e in the future. No indication of prices has been given.
Chorus’ chief customer officer, Ed Hyde, said the exceptionally low latency of Hyperfibre would enable new ways to collaborate and had the potential to revolutionise digital business models.
“Obvious advocates will be those using high performance software applications that depend on real-time communication and high-resolution images, such as remote medical diagnostics and surgery, instantaneous software prototyping, as well as gaming and interactive entertainment services,” he said.
Chorus said the move would make New Zealand one of only 10 countries in the world to deploy broadband faster than GPON.
Rollout will start in February 2020. Customers can register their interest and receive updates on the availability of the service at www.chorus.co.nz/hyperfibre