Commerce Commission seeks feedback on fibre regulation regime

The Commerce Commission has unveiled its position on the rules, requirements and processes that will underpin the new regulatory regime for New Zealand’s fibre networks, with the release of an issues paper and a series of supporting studies.

Telecommunications Commissioner Dr Stephen Gale said the paper detailed the Commission’s emerging views for designing a regulatory framework that will see Chorus subject to revenue caps and minimum quality standards, and was an opportunity to test the Commission’s thinking on different topics before it made its draft decisions.

“We are keen to hear from consumer advocates on our current thinking around how we treat key issues such as the cost of capital and what is included in Chorus’ regulated asset base,” he said.

In anticipation that the UFB rollout will be completed by the end of 2022, Parliament in 2018 passed legislation tasking the Commission with creating a utility style regulatory regime for fibre networks that promotes the outcomes of competitive markets, including preventing Chorus and the other local fibre companies  from earning excessive profits at the expense of network quality and consumers.

The new regime was to apply from 2020, but the implementation date was deferred until 1 January 2022 at the commission’s request.

The paper focuses on the development of input methodologies for fibre regulation required by the Act that will inform the initial three-year price-quality path for Chorus and information disclosure determinations for Chorus and the other LFCs.

The commission intends to publish separate plans for its consultation relating to information disclosure and price-quality regulation, starting with a short paper later this year.

Gale said the commission was examining the dimensions of quality that matter to New Zealanders, and how they might flow through to standards that Chorus will be required to meet.

“The quality dimensions are based on the stages of the fibre service lifecycle and include customer service, service availability and performance among others,” he said.

Chorus and the local fibre companies will also be required to publicly disclose information about their performance in what is colloquially known as sunlight regulation.

The summary paper, Fibre regulation emerging views, has been published with: an accompanying technical paper; an enquiry into Chorus pricing under the proposed revenue cap, by Ingo Vogelsang and Martin Cave; a paper on financial capital maintenance and its role in fibre regulation in New Zealand, also by Vogelsang and Cave; a paper on the cost of capital for fibre network losses, by Dr Martin Lally of Capital Financial Consultants; a paper cost of capital for regulated fibre telecommunication services in New Zealand: Asset beta, leverage, and credit rating, by Cambridge Economic Policy Associates.

Submissions on the summary paper are due by 16 July. Prior to this the commission intends to hold an industry workshop, on 25 June 2019, to discuss key topics relating to this paper with stakeholders.

It says this will provide an opportunity for stakeholders to clarify their understanding of its emerging views, options and issues, and to ask questions, and allow it to receive early views and feedback on the paper.

There will also be  a separate session with a consumer focus group, made up of representatives from Consumer NZ, InternetNZ and TUANZ.