NZ eyes keeping copper prices high to encourage fibre investment

The New Zealand government is proposing putting prices for services on par with fibre prices in order to encourage NZ telcos to invest in the new fibre network.
Written by Josh Taylor, Contributor

A review of the New Zealand Telecommunications Act has proposed reducing the price of services on the legacy copper network in the country, but has said that the prices should be kept in line with Ultra-Fast Broadband (UFB) fibre network prices in order to encourage investment in the fibre services.

The discussion paper (PDF), produced by the New Zealand Ministry of Business, Innovation and Employment and released today by IT Minister Amy Adams, states that the relative price for access to the copper network and the fibre network will determine whether telecommunications companies go over to fibre or stick with copper.

Unlike Australia's National Broadband Network (NBN), with the rollout of New Zealand's UFB network, the existing copper network will remain in place next to the fibre network, which is being rolled out by Chorus, Northpower, Enable, and Ultrafast Fibre.

The current wholesale copper access price is set by the Commerce Commission, and currently sits at NZ$44.98 per month, but the discussion paper proposes bringing it in line with fibre pricing, down to between NZ$37.50 and NZ$42.50 per month.

The discussion paper said that the prices should be not too low to discourage investment in the fibre networks, but, at the same time, not too high that consumers miss out on the benefits of the falling costs of providing services on copper over time.

"Telecommunications companies need a good uptake of the new technology in order to justify developing new services and marketing them to consumers," the report stated.

Keeping the prices higher would move more people over to the fibre network sooner, and would minimise the time period needed for the two networks to run side by side, the commission said.

In her speech announcing the release of the paper, Adams said that the proposed price change would be in the long-term interest of consumers.

"This approach means consumers get the benefit of lower prices for their existing services in the short term, and will also have access to the long-term benefits of replacing the copper network with a modern fibre network," she said.

The inquiry was brought forward from its original date in 2016, because the New Zealand Commerce Commission recommended much lower pricing for access to copper services at around NZ$33, causing the government to fear that such a substantial price drop would hinder the ability of Chorus and the other fibre construction companies to fund the rollout.

New Zealand Labour's IT spokesperson Clare Curran said that the government is favouring Chorus over New Zealand consumers.

"It is price fixing to suit its mates at a cost to consumers. [Adams] has essentially let Chorus set the price for copper broadband so that their fibre broadband is not undercut. Her decision today could breach international law, and certainly breaches New Zealand's regulatory framework," she said in a statement.

"Instead of the Commerce Commission setting the price, it has been sidelined, and Chorus and the government are in charge. It's Kiwis that are paying the price."

Curran said that it sets a bad precedent, wherein the private company in a public-private partnership is able to change the contract with the government.

"It's the private company wearing the pants in this partnership," she said.

Unsurprisingly, the announcement was welcomed by Telecom New Zealand CEO Simon Moutter, who said that it provides certainty for telcos.

"Telecommunications service providers like Telecom just need pricing certainty, so we have a clear understanding of the costs involved, across various technologies, for providing services to our customers," he said in a statement.

Submissions to the inquiry are open until September 13, 2013. The government will make its decision by early 2014, according to Adams.

Editorial standards