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531 posts

Ultimate Geek
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# 175521 2-Jul-2015 14:47
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So this has been dragging on for a long time, with Chorus basically having a monopoly over the copper lines the charges they demanded were deemed unreasonable and were investigated by the Commerce Commission.

ISP's in NZ predicted around $34 and subsequently configured their pricing around this figure.
That would have been $9 cheaper than the current $45 each and every person is charged for using the copper lines going to your house.
So this now means that the ISP's have to accomodate for the $4 difference between what was predicted and what Chorus can actually charge.


Now here's what that's a steaming pile of turd..

The annoying thing here is "...The consulting firm told the Government Chorus was "at risk" of being unable to fulfil the contracts in the wake of a Commerce Commission ruling that will slash the price it can charge for access to its copper network from next December."

But how the hell can you honestly look me and say a company operating a monopoly at 17% profit in their maiden year, and 23% in the year after is going to have issues paying the UFB bills?
And why was the UFB contract awarded to them in the first place?

Their maiden profit: $103Mill from $603Mill sales in 2013.
nd in 2014 they posted $148Mill from $648Mill in sales.

So my point is they're hardly struggling with a 23% profit margin?

Also the Commerce Commission ignored almost 50,000 people pleading with them to look at the wholesale price rate which would still be significantly higher than other countries even at the suggested $34!

See graph below, which is the expected ($34) vs other counties wholesale prices: 

What does this mean for you and me?

Well it sends a signal to Chorus that basically they can continue to doing what they're doing. They've had a massive win with this decision, and it's sure to be reflected in their share prices. 

What this means to you and I is we are going to have pay more for our broadband, I expect companies have already started to look at their plans and will probably increase prices. We've already been warned by Spark, Vodafone and others that they're going to increase their prices.

So tell me, (if you manage to make it this website, over your poor broadband connection) what do you think? Is the Commerce Commission being too lenient on Chorus, and allowing them to continue to gouge the working public over wholesale prices?

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27971 posts

Uber Geek
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Biddle Corp
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  # 1336598 3-Jul-2015 19:13
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See graph below, which is the expected ($34) vs other counties wholesale prices: 

What does this mean for you and me?

What does it mean? It means very little.

First off you incorrectly interpreted the graph. That shows the $28 UCLL cost of a copper connection. It is not the price of a POTS+UBA bundle which is now priced at $38

The price of an urban UCLL circuit was well under $20 a few years ago when UCLL copper was split between rural and urban. As part of the post separation agreement with the Commerce Commission this was averaged out because the Commerce Commission disagree with split urban & rural pricing and want the same access price across the country. This pretty much put an end to unbundling expansion post 2011 as the economics of it totally changed.

ISPs who factored in a $38 price misread the market and the commerce commission. In the race to the bottom they overlooked common sense and the fact a forward looking price model was very likely going to be adopted by the Commerce Commission because most big players were asking for that. A forward looking model was ALWAYS going to mean price increases in a country where fibre is being deployed in parallel with copper. This is the whole point of the model. If big players didn't want this to happen, they shouldn't have asked for a forward looking model.

Your Chorus ROI figures are wildly inaccurate as well. I'd suggest you look through their last few annual reports and the Commerce Commission ruling to see some true figures.

I completely and utterly disagree with pretty much everything you've posted, and my reasons for that are in the many other posts on this topic here so there is no point repeating these like a stuck record. I'm very critical of many things the Commerce Commission have done over the last few years, particularly in the copper and broadband space so it's good to see them do something logical for a change. All we need them to do next is actually define a regulated UBA product offering that meets the needs of internet users in 2015, not 2005.

The role of the Commerce Commission is NOT to ensure the best value for customers. Their role is to ensure regulation maintains a healthy, competitive, marketplace.

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