New Zealand fixed-line network operator Chorus has received the latest draft determination from the Commerce Commission on a range of regulated products and services. The Commission has proposed a glide path for all the monthly rental prices. The Commerce Commission has set the draft UCLL price of NZD 26.74 in year one, reaching NZD 28.56 in year five, compared to NZD 23.52 currently, and NZD 28.22 from the Commission’s previous draft determination. The draft UBA price has been set at NZD 11.15 in year one, down to NZD 10.52 in year five, compared to NZD 10.92 currently and NZD 10.17 from the Commission’s previous draft determination.
Over the five year period the gross EBITDA impact from the revised monthly charges is largely in line with the previous draft, with reductions in years one and two and increases in years four and five. The new prices, if confirmed, would be implemented upon the completion of the Commerce Commission’s process.
Chorus says it has concerns with two new or updated aspects to the determination, namely transaction charges and backdating. Transaction charges account for approximately NZD 40 million in annualised revenue today. For the key transactions the Commission has proposed a reduction of 30 percent, or around NZD 12 million annually.
Chorus says its initial analysis suggests that the proposed reductions in one-off transaction charges may require the operator to provide these services at below cost. The Commission has also indicated, in a split decision, that it does not propose to backdate the revised FPP charges.
Chorus continues to believe that the draft pricing significantly undervalues the true cost of network investment in New Zealand. The operator claims that data from its network rollout experience, urban UFB pricing agreed with the Crown and the comparable value of the Commission-regulated electricity networks all support the view that aggregate pricing should be at or above 2011 levels.
