NZ ComCom reviewing Chorus copper terms

The New Zealand Commerce Commission (ComCom) has announced the beginning of a review of the non-price terms of telecommunications carrier Chorus' unbundled bitstream access (UBA) service, examining whether the copper service will fulfil the medium-term needs of consumers.

The UBA allows other retail service providers to provide customers with fixed-line broadband services by leveraging Chorus' legacy copper lines, equipment, and software. Regulated UBA services are provided at a designated regulated price, while Chorus can charge different prices for its UBA commercial variants.

The paper, Section 30R review of the UBA standard terms determination Process and issues paper, is an examination of whether the UBA standard terms determination (STD) is "fit for purpose" as described under Section 30R of the Telecommunications Act 2001.

"UBA is the most common wholesale input used by retail service providers to deliver fixed-line broadband services to their customers," the ComCom said in its paper.

"There are currently approximately 1.1 million UBA connections in New Zealand. The regulated UBA service is delivered over Chorus' fibre-to-the-node (FttN) network."

Despite advancements in broadband technology, the ComCom still regards Chorus' copper service as an "anchor" in the fixed-line market.

"In our view, the regulated UBA service has historically acted and should continue to act as an 'anchor' for the wholesale bitstream market," the paper says.

"An anchor regulation approach leaves scope for Chorus to offer commercial variants with higher and lower specifications. The idea is that although Chorus is free to charge what it likes for commercial UBA variants, the regulated UBA service, where appropriately defined, acts as a constraint on those variants."

However, it is partially due to technological advancements that the service is now being reviewed. It is also being re-examined due to Chorus' structural separation from Telecom New Zealand in 2011.

"While the regulated UBA service has evolved over time, we recognise that there remains some uncertainty over what Chorus is required to provide. By clarifying the technical features our aim is to ensure the regulated service remains suitable for typical broadband customers, and allows Chorus to develop commercial variants for specific user groups," said Telecommunications Commissioner Stephen Gale.

"Additionally, having recently completed our TSLRIC pricing review of the UBA service, this review will be helpful in considering whether and how the UBA service description and the TSLRIC pricing principle modelling decisions should be aligned."

During this review, the ComCom is exploring whether the service is future proofed; whether there are incentives for Chorus to continue investing in and innovating on its UBA; and whether the UBA service should be aligned with technical specifications of the service in the fixed pricing principles (FPP).

More specifically, the ComCom is seeking feedback on whether the technical and functional requirements of the regulated UBA service are fit for purpose; whether a 10xGigE handover option should be added to the UBA STD to support growing bandwidth needs; whether the line between regulated UBA and commercial UBA services should be better clarified; whether Chorus should be required to provide regulated UBA services over VDSL; whether Chorus should be allowed to prioritise commercial UBA traffic over regulated UBA traffic; whether geographical differences should apply to regulated UBA specifications; whether the process for introducing and removing commercial UBA variants should be amended; whether the enhanced UBA variants should be withdrawn from the regulated service; and whether access seekers should be given greater visibility of Chorus' systems.

Chorus had previously attempted to withdraw VDSL as a regulated UBA service, until Spark objected and Chorus put the proposed changes on hold amid a ComCom investigation into the matter.

In December, the ComCom released its UBA final pricing determination, setting it NZ$50 million lower than that applied when Chorus separated itself from Telecom -- though NZ$120 million higher than the original pricing proposed by the ComCom.

Chorus CEO Mark Ratcliffe and chairman Patrick Strange attributed this pricing decision to the telco's sharp decline in its financial results. For the six months to December 2015, Chorus reported a net profit of NZ$33 million recorded -- plummeting by 48.4 percent from last year's NZ$64 million -- on revenue of NZ$479 million, down 9.1 percent.

"As expected, our financial result was down sharply on the prior period because of lower regulated copper prices set by international benchmarking and charged from 1 December 2014," Ratcliffe and Strange said in a joint statement.

"The final aggregate copper pricing determined by the Commerce Commission on 15 December 2015 was an improvement on the prior draft decisions, and aligns closely to entry-level fibre pricing by 2020. However, the revised regulatory pricing only became effective on 16 December 2015.

"The improved pricing outlook, combined with the removal of overhanging regulatory uncertainty, helped the Chorus share price reach a new record high immediately following the commission's pricing determination."

As of December 31, Chorus had 1.223 million total broadband connections, consisting of 74,000 basic UBA services; 7,000 naked basic UBA; 763,000 enhanced UBA; 128,000 naked enhanced UBA; 94,000 VDSL; 45,000 naked VDSL; and 112,000 fibre services.

Chorus, along with local fibre companies Northpower Fibre, UltraFast Fibre, and Enable Networks, is also rolling out the New Zealand government's fibre-to-the-premises Ultra-Fast Broadband (UFB) and Rural Broadband Initiative (RBI). By the end of calendar 2019, 97.8 percent of the NZ population will be covered by either the UFB or the RBI.

"Although next-generation infrastructure is being rolled out via the UFB initiative, we still consider it important to review the UBA STD now," the ComCom concluded.

"Chorus' copper network will remain, for some time, the main infrastructure over which fixed-line telecommunications services are provided to New Zealanders."

The ComCom is accepting submissions from interested parties until May 5.