NZ 'copper tax' a needed compromise

The so-called copper tax keeping wholesale prices in line with fibre broadband costs will help drive uptake on the New Zealand Ultra-Fast Broadband network.
Written by Darren Greenwood, Contributor

In the dark and distant days of the noughties, when New Zealand was ruled by Helen Clark, the commentariat wanted faster broadband and the dastardly monopoly Telecom to receive a good spanking.

Looking to become more appealing, then-Opposition Leader John Key pushed Ultra-Fast Broadband (UFB) to make him hip and sexy, so UFB became a personal policy of his, and he successfully came to power.

And to help make UFB work, Telecom got yet another spanking, with it being forced to split into two and create Chorus.

This followed the unbundling of the local loop, something forced upon it by the newly elected leader of the Labour Party, David Cunliffe, who was the IT minister during the noughties, a loop unbundling also backed and demanded by the commentariat.

Now, here we are several years later. UFB is being rolled out, and we have controversy over what campaigners are calling a "copper tax".

The Commerce Commission has recommended a 25 percent drop in the wholesale price of copper. But the government believes that such a cut could harm Chorus, maybe even put it out of business, or at least threaten the rollout of its UFB, because copper-based broadband will become much cheaper than fibre-based broadband.

Campaigners say that not forcing Chorus to slash prices by this amount effectively amounts to a hidden NZ$600 million subsidy to Chorus, and they are calling this a "copper tax", which would be paid by the consumer.

There is, of course, much debate over this. The commentariat says that Chorus should stick to the agreements it made with the government, but, like any IT project, the fibre rollout appears to be costing more than planned. So, who should pay this extra? Should it be Chorus, the consumer, or the taxpayer?

And it is by no means certain that if the wholesale price of copper did fall, the broadband retailers would pass on such savings to consumers, anyway.

It all seems like a bit of a pickle as the government finds itself between a rock and a hard place, with a flagship policy in some difficulty.

It may be that copper-based broadband represents a stepping stone to fibre, but it may also be adequate for the needs of many, if not most.

No doubt some compromise will have to be found, so the "losses" to the consumer are not that great, nor are the "losses" to Chorus, and the UFB rollout isn't threatened in any way. The taxpayer will also have to bear some of the extra burden, say through government advertising to help boost UFB takeup. Compromise is the Kiwi way. It is the Key way, too.

The New Zealand Herald warned of governments "picking winners" in an editorial on Tuesday. Indeed, there is a message that once governments step in to satisfy certain lobby groups and interests, this can sometimes come at the expense of someone else. Picking winners means there are losers too, and the losers will complain loudly, so there is no pleasing everybody.

We see this with the churlish complaints from the campaigners, who should be more than happy to have a government pushing ahead with the UFB it demanded, and doing the best it can to make it work, given the circumstances of tight government budgets and so on.

Yes, compromises will have to be found, but it seems there's no satisfying some people.

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