The changes are intended to close some of the funding gap that was identified in the government-commissioned independent report by Ernst & Young Australia. The report investigated Chorus’ capability to deliver on its contractual commitments with the government, in light of the Commerce Commission’s decisions on final wholesale prices for copper-based broadband services.
The report identified a gap of NZD 1 billion and indicated that a significant portion of this could be met from Chorus undertaking cost savings measures and changes to its dividend and debt policies, leaving a residual gap of NZD 200 million to 250 million.
The changes include more flexibility in the deployment. While the agreed completion date for each candidate area does not change, Chorus now has greater flexibility in how it phases the rollout within those timeframes.
Furthermore, Crown Fibre Holdings has agreed to subscribe for a portion of the securities on a monthly basis as work is completed, better aligning receipt of Chorus’ cash flows with its outgoings, with the balance paid on completion of stages and user acceptance testing. This will allow Chorus to manage its cash flow more effectively.
Chorus may also deliver UFB services in multi-dwelling units (MDUs) with common communications rooms using fibre to the premises (FTTP) and in-building reticulation where Cat 5e cabling exists. Where existing cabling isn't sufficient, Chorus will continue to reticulate using fibre. This is expected to reduce the cost of installations.
Chorus will also charge real estate developers for reticulation of greenfields developments as it does in the non-UFB areas of the country to a maximum of NZD 900 per premises.
The company has also agreed to increase its Non-Standard Installation Fund by NZD 8 million to provide the industry with greater certainty regarding installation costs. In line with this increase in the Non Standard Installation fund contribution, Chorus will reduce its own fibre marketing spend from NZD 5 million per annum to NZD 2.5 million.
Internet advocacy group InternetNZ said the changes are “a mixed bag” for broadband users while being generally positive for Chorus. The group notes that the changes mean that some people in multi-unit dwellings should get access to UFB faster, but if that means using existing high-speed Cat5e/Cat6 copper infrastructure instead of rolling out fibre, they may miss out in the long term on all the speed and reliability fibre offers. “We now await news of any further changes being discussed between CFH and Chorus, to see where these lead,” InternetNZ said.
