Chorus chair puts ComCom on notice over UFB regulation

Chorus chair Patrick Strange has warned the Commerce Commission that over-regulation of the UFB network could scare off much needed foreign investment in New Zealand infrastructure.

In his address to the Chorus AGM Strange said: “A key signal to potential investors about the risks of investment in New Zealand infrastructure will be the Commerce Commission’s implementation of the regime that will govern the new fibre broadband network built by Chorus.”

Strange said international investors, including many that are Chorus shareholders were watching the Chorus regulatory process very closely.

“If they sense that they are not going to get a fair return for the multi-billion dollar investment they made, a return that reflects the considerable risk they took and the long period they have waited for a return, this will be the last investment they and their investment community will make in New Zealand infrastructure - they have choices about where they put their money, and we are competing with other nations for it.”

Strange hailed the success of the UFB project, saying Infrastructure NZ had called it “one of the most successful public private partnerships in New Zealand’s history,” and said a number of other large New Zealand infrastructure projects must get underway in the coming years.

“Recent Treasury figures indicated that some $NZ130b needs to be invested over the next 10 years to get New Zealand’s infrastructure up to scratch to meet significant population growth and ever increasing demand,” he said, but did not identify any of these.

He said New Zealand’s attractiveness to investors both locally and, most importantly internationally, would underpin the country’s ability to deliver this infrastructure programme.

In anticipation that the UFB rollout would 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 would promote 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.

In November 2018 it issued an invitation to comment, as the first stage in a process that, according to its website, would culminate in a final decision by 30 June 2020. However the implementation date was later put back, at the Commission’s request to 1 January 2022.

The Commerce Commission is looking to impose a revenue cap and service quality standards on Chorus for its UFB offering along with information disclosure rules for Chorus and the other fibre companies.

It will set the maximum revenue that Chorus can earn from customers and the minimum quality standards it must meet. Additionally, all four fibre network providers will be required to publicly disclose information on their performance.

In May 2019 the commission released an issues paper and a series of supporting studies that set out its position on the rules, requirements and processes that will underpin the new regulatory regime.