Chorus facing regulated revenue cap in New Zealand

Fibre providers in New Zealand will need to disclose profits, quality of service, and expenditure from 2022.
Written by Chris Duckett, Contributor

The New Zealand Commerce Commission (ComCom) detailed its draft regulation for fibre providers on Tuesday, with the changes set to apply from 2022 when it is expected the majority of Kiwis will be connected to the ultra-fast broadband network.

Among the changes is a revenue cap for wholesaler Chorus, which ComCom said would limit the prices consumers would have to pay, as well as minimum standards for service and network performance.

All fibre operators in New Zealand would need to publish metrics such as profits, quality of service, and expenditure.

"It's our job to make sure critical national infrastructure, like fibre broadband networks, work for the long-term benefit of consumers," Telecommunications Commissioner Dr Stephen Gale said.

"Our new regulatory regime for fibre aims to ensure quality fibre internet services are delivered to New Zealanders at an appropriate price, at the same time as incentivising providers to invest, innovate and run their networks efficiently."

ComCom is expecting to publish its final decision in July next year before setting the revenue cap, and quality and disclosure standards in late 2021. The revenue cap would cover the years 2022 to 2024.

For its part, Chrous said the draft decision was complex, but added ComCom's equations did not reflect a "fair return" on its investments.

"We thank the Commission for the considerable work that has gone into the draft decision and welcome this step towards establishing a utility style framework for New Zealand's key communications infrastructure," outgoing Chorus CEO Kate McKenzie said.

McKenzie is due to leave at the end of year and take a seat on the board of Australia's National Broadband Network, with former NBN chief strategy officer JB Rousselot taking over the reins of Chorus.

"My one regret is I'd love to take the fantastic Chorus fibre network back home with me, but yeah, that's probably not going to happen," McKenzie said when announcing her departure.

On Monday, New Zealand telco Spark said it would be extending its 5G rollout into five South Island "heartland locations" before Christmas, with other "heartland" areas to be connected from March 2020.

"The roll-out of 5G wireless broadband to heartland locations from March 2020 will use some of our existing spectrum bands and Nokia Radio Access Network equipment," Spark technology director Mark Beder said.

"We are prioritising our activity to heartland locations as we think these are the places that will benefit most from the increased capacity and speed of 5G wireless broadband, and we are excited to be bringing the early benefits of 5G to customers in parts of New Zealand that have usually lagged well behind the major centres for previous technology rollouts."

Spark added that it will use three vendors for radio equipment, namely Nokia, Samsung, and Huawei, and use Cisco and Ericsson in its network core.

"We've consistently said our approach to 5G will be multi-vendor. A key reason for this is that 5G technology is still emerging and is likely to develop significantly in the next few years, so a mix of vendors makes sense," Spark general manager of value management Rajesh Singh said.

"As with any network deployment the roll-out of our 5G network is subject to government approval in accordance with the Telecommunications (Interception Capability and Security) Act 2013 (TICSA). We have already obtained approval through TICSA to use Nokia 5G RAN equipment for our recently announced deployment in Alexandra, and for our upcoming locations before Christmas."

A year ago, the NZ Government Communications Security Bureau (GCSB) banned the use of Huawei radio equipment by Spark.

"The Director-General has informed Spark today that he considers Spark's proposal to use Huawei 5G equipment in Spark's planned 5G RAN would, if implemented, raise significant national security risks," Spark said at the time.

"This means Spark cannot implement or give effect to its proposal to use Huawei RAN equipment in its planned 5G network."

The move came after Spark and Huawei a week earlier ran a trial 5G network in Auckland, which claimed to have separated the edge and core of the network.

Clearly, GCSB wasn't buying it.

"I can confirm the GCSB under its TICSA responsibilities, has recently undertaken an assessment of a notification from Spark. I have informed Spark that a significant network security risk was identified," GCSB Director-General Andrew Hampton said when handing down the ban.

One of the reasons given by the Australian Signals Directorate (ASD) for recommending the banning of Huawei in Australia was the diminished distinction between edge and core networks in 5G.

"The distinction between core and edge collapses in 5G networks. That means that a potential threat anywhere in the network will be a threat to the whole network," ASD Director-general Mike Burgess said in October 2018.

"In consultation with operators and vendors, we worked hard this year to see if there were ways to protect our 5G networks if high-risk vendor equipment was present anywhere in these networks.

"At the end of this process, my advice was to exclude high-risk vendors from the entirety of evolving 5G networks."

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