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Topic # 112263 3-Dec-2012 08:19 Send private message

Just received:


The Commerce Commission has today released its final decision on the wholesale price for access to Chorus’ unbundled copper local loop (UCLL).

The new geographically averaged price is $23.52 per month per line and comes into effect on 1 December 2014. This change equates to a 3.85% reduction on the prices set in 2007, which geographically averaged is $24.46.

Updated urban and non-urban UCLL monthly rental prices of $19.08 and $35.20 respectively have also been set. The updated urban and non-urban prices come into effect immediately.

The UCLL price applies to the local copper lines between homes or businesses and an exchange. Retail telecommunications companies rent UCLL from Chorus to provide voice and broadband services to end users.

The Telecommunications Act requires that the UCLL price is set by international benchmarking, that is, by comparing and matching prices in New Zealand to countries likely to have similar costs to us.

“Due to the lack of countries that have similar networks to New Zealand and similar cost conventions, it has been a difficult process to establish relevant benchmarks. We have, however, now updated our benchmarks, and conclude that the relevant costs in New Zealand are likely to have dropped since 2007. But the effect of this drop has been largely offset by inflation,” said Dr Stephen Gale, Telecommunications Commissioner.

“That is why we have adopted a small decrease in the wholesale price relative to 2007.”

In May this year, the Commission released its draft decision which proposed a price drop of about 20% for the UCLL service. The draft decision reflected the Commission’s view at that time that the price for the UCLL service should be less than the network average, because the lines are shorter than the average. This view was generally shared by the industry and interested parties.

Following feedback, submissions and a conference in September on this topic, the Commission and most parties now agree that there is no clear evidence that the shorter lines cost less and that it is preferable that all UCLL lines be priced the same regardless of length. This is the approach the Commission has adopted in its final decision.

The change in the UCLL price flows through to the prices of the unbundled bitstream access (UBA) service (for broadband services), the unbundled copper low frequency (UCLF) service (for voice services), and the sub-loop service (SLU).

You can find the final UCLL decision on the Commission’s website.






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  Reply # 725963 3-Dec-2012 08:33 Send private message

Finally some logical thinking from the Commerce Commission!

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  Reply # 725966 3-Dec-2012 08:35 Send private message

Why wait a year for this to happen??




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  Reply # 725967 3-Dec-2012 08:42 Send private message

Because they set the framework in place before separation for a geographically averaged price 3 years after separation day. This rulign isn't about changing that, it's about setting that geographically averaged price, and the price for the next 2 years until that occurs.



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  Reply # 725969 3-Dec-2012 08:45 Send private message

And here's the government comment:


The Government has today received the Commerce Commission's draft determination on pricing for the unbundled bitstream access (UBA) and a final determination on the unbundled copper local loop (UCLL), and will now take time to review these decisions.

Communications and Information Technology Minister Amy Adams says the decisions on both prices, taken together, are potentially significant for the industry and end users.

“I have asked my officials to review the effects of the pricing and report back to me," Ms Adams says.

“I note that the Commission’s report says it has only found two countries to benchmark the UBA rate against, and has struggled to find a broad sample of countries.

“New Zealand is one of the few countries in the world to have structurally separated its main telecommunications company, while at the same time rolling out a fibre network. This potentially highlights the need for a pricing methodology appropriate for the New Zealand context.”

The UCLL portion of the pricing decision is applicable immediately, while the UBA rate will not take effect until November 2014.





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  Reply # 725977 3-Dec-2012 08:58 Send private message

I am confused (it doesn't take much!) The press release is talking about geographically averaged prices but has updated the urban and non urban prices. Do ISP's now pay the first price or the urban/non urban prices?




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  Reply # 725980 3-Dec-2012 09:08 Send private message

hairy1: I am confused (it doesn't take much!) The press release is talking about geographically averaged prices but has updated the urban and non urban prices. Do ISP's now pay the first price or the urban/non urban prices?


Prices drop immediately for both urban and rural. In two years time urban will increase and rural decrease as they both move to a single geographically averaged price.


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  Reply # 725981 3-Dec-2012 09:09 Send private message

It's good to see that UBA pricing will also drop in 2014 as the Commerce Commission move from retail minus to cost plus pricing.

The use of retail minus pricing has been the single biggest factor that has kept broadband pricing at inflated prices.

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  Reply # 725983 3-Dec-2012 09:18 Send private message

Although its good to see prices dropping, is there a risk this will hurt UFB uptake?





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  Reply # 726006 3-Dec-2012 09:48 Send private message

sbiddle: It's good to see that UBA pricing will also drop in 2014 as the Commerce Commission move from retail minus to cost plus pricing.

The use of retail minus pricing has been the single biggest factor that has kept broadband pricing at inflated prices.


But boy is that going to hammer Chorus' bottom line since they had expected a set price to offer services, and that has significantly changed the goal posts for them.  I'll be interested to know what impact it has on the stock price.




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  Reply # 726032 3-Dec-2012 10:39 Send private message

BarTender: 
But boy is that going to hammer Chorus' bottom line since they had expected a set price to offer services, and that has significantly changed the goal posts for them.  I'll be interested to know what impact it has on the stock price.


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  Reply # 726051 3-Dec-2012 11:24 Send private message

freitasm: And here's the government comment:


The Government has today received the Commerce Commission's draft determination on pricing for the unbundled bitstream access (UBA) and a final determination on the unbundled copper local loop (UCLL), and will now take time to review these decisions.

Communications and Information Technology Minister Amy Adams says the decisions on both prices, taken together, are potentially significant for the industry and end users.

“I have asked my officials to review the effects of the pricing and report back to me," Ms Adams says.

“I note that the Commission’s report says it has only found two countries to benchmark the UBA rate against, and has struggled to find a broad sample of countries.

“New Zealand is one of the few countries in the world to have structurally separated its main telecommunications company, while at the same time rolling out a fibre network. This potentially highlights the need for a pricing methodology appropriate for the New Zealand context.”

The UCLL portion of the pricing decision is applicable immediately, while the UBA rate will not take effect until November 2014.



The government's comment sounds just like a Chorus lobbyist or press release.

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  Reply # 726432 3-Dec-2012 20:27 Send private message

John Key hasn't ruled out changing the law to maintain a high copper wholesale price and maintain the Chorus monopoly pricing.

So much for the free market.

http://www.nbr.co.nz/article/chorus-pricing-decision-very-problematic-says-key-bd-133405

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  Reply # 726631 4-Dec-2012 09:55 Send private message

ajw: John Key hasn't ruled out changing the law to maintain a high copper wholesale price and maintain the Chorus monopoly pricing.

So much for the free market.

http://www.nbr.co.nz/article/chorus-pricing-decision-very-problematic-says-key-bd-133405


Um I don't see how this has anything to do with the free market nor monopoly. Firstly, Chorus is a natural lines monopoly and will be for the forseeable future. If you ignore that, lowering prices will actually help their monopoly position as it would discourage alternate network investment...





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  Reply # 726658 4-Dec-2012 11:01 Send private message

ajw: John Key hasn't ruled out changing the law to maintain a high copper wholesale price and maintain the Chorus monopoly pricing.

So much for the free market.

http://www.nbr.co.nz/article/chorus-pricing-decision-very-problematic-says-key-bd-133405


The issue is the government spending of $1.5 billion in public money, plus a wodge of money from Chorus ( which was presumably predicated on certain income levele) on the roll out of Fibre.

From a value for money proposition spending billions, when a large proportion of customer will simply choose to stay on a relatively cheap copper service is a bit self defeating......... 

Everyone knows that fibre is the future, but slashing the price of copper, just makes fibre so much more unattractive for the "regular punter"TM

ajw

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  Reply # 726667 4-Dec-2012 11:11 Send private message

wellygary:
ajw: John Key hasn't ruled out changing the law to maintain a high copper wholesale price and maintain the Chorus monopoly pricing.

So much for the free market.

http://www.nbr.co.nz/article/chorus-pricing-decision-very-problematic-says-key-bd-133405


The issue is the government spending of $1.5 billion in public money, plus a wodge of money from Chorus ( which was presumably predicated on certain income levele) on the roll out of Fibre.

From a value for money proposition spending billions, when a large proportion of customer will simply choose to stay on a relatively cheap copper service is a bit self defeating......... 

Everyone knows that fibre is the future, but slashing the price of copper, just makes fibre so much more unattractive for the "regular punter"TM


So another exercise in social engineering with governments dictating how people should think. What is the use of the Commerce Commission if the government changes the law every time they come out with a decision the government doesn't like to protect a monopoly.If government is free to overturn the ruling of "independent" bodies if and when it choses then it makes a mockery of the claim that they are indeed independent. They effectively become a sock-puppet to the whims of their political masters and therefore utterly ineffective -- a giant waste of taxpayers' money.

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