New Zealand increases wholesale copper prices

New Zealand’s Commerce Commission has published its final decision on wholesale broadband prices, with higher rates than its previous draft.

From December 16, prices will be set at $20.13 (NZD 29.75) per month for unbundled copper local loop (UCLL) and $7.74 (NZD 11.44) a month for unbundled bitstream access (UBA). The maximum monthly prices will increase slightly each year for the next five years, with an average of $41.69 over the period. 

The news was welcomed by operator Chorus but met with opposition by Spark.

Effective from the same date, Chorus will charge $27.87 (NZ$41.19) a month for wholesale copper broadband, $20.13 (NZ$29.75) for unbundled copper local loop (UCLL) and $7.74 (NZ$11.44) for unbundled bitstream access (UBA).  

The latest figures are higher than the $26 (NZ$38.43) per month the Commission proposed in July 2015. 

"Significant changes, such as the need to increase the amount of trenching required to physically lay the network and adjusting the make-up of fibre and fixed wireless connections, led to the final price rising," said Stephen Gale, telecoms commissioner.

"This has been partially offset by other changes, including a decrease in the allowed rate of return for Chorus due to the fall in interest rates since July, and the removal of vacant properties from the model," he added.

Chorus said the Commission has taken into account the true value of its network but added that prices are still below those when it was spun off from Telecom New Zealand, now known as Spark. 

"We have consistently said that the previous draft prices significantly underestimated the true value of Chorus' network, so it is pleasing that the Commission has taken on board the industry's repeated requests and used some of the real world costs of building a network," said Mark Ratcliffe, Chorus CEO.

Spark warned that the latest prices mean consumers will pay almost double the regulated line charges in other comparable countries. The decision will increase its 2016 financial costs by approximately $14.9 million (NZD 22 million) and full annual costs by $25.7 million (NZD 38 million).  

"The massive swings in successive Commerce Commission decisions within a matter of months makes it extremely hard for any business to invest, plan and price its services effectively," said Simon Moutter, managing director of Spark New Zealand. "We have now had two years of market disarray, with significant fluctuations at every stage of the process. The losers out of this are New Zealand consumers and businesses."

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