Telecom backs setting copper prices until 2020, warns against getting too far away from input cost

Monday 23rd September 2013

Telecom Corp, the country's biggest telecommunications company, is backing government moves to set the price for access to Chorus' ageing copper network until 2020 to protect the national roll-out of fibre lines, though it warns against getting too far away from the underlying costs of the service.

Auckland-based Telecom supports the government's ultrafast broadband initiative to help fund a fibre-based network across three-quarters of the country, and accepts that if regulated pricing on the old copper network undermines the programme's success something needs to change.

"Ongoing debates about copper pricing risk distracting our industry, and customers, from the far more important questions of how, as a country, we can best take advantage of the very valuable fibre assets we are investing in," chief executive Simon Moutter said in a statement. "Above all else, our industry needs input pricing certainty."

Communications Minister Amy Adams sought a review of law governing the sector after Telecommunications Commissioner Stephen Gale proposed sharp cuts to the regulated price of unbundled bitstream access, a copper-based service, something the government viewed as undermining the economics of the fibre network it is bankrolling.

The proposed cuts to UBA pricing came after a three-year freeze and were seen as a way to offset the national averaging of the price of unbundled copper local loop access, which effectively increased prices for urban customers, accounting for about 70 percent of users as part of a proposed transition period.

Telecom backs the third option in the review, in which the government would set the prices for UCLL component of the old network, leaving the Commerce Commission to set the price for UBA.

The company said the total monthly cost of copper lines is closer to the bottom end of the discussion document's propose band between $37.50 and $42.50, though a realistic range might be between $35 and $40.

If prices are set too high on the copper lines, the market will react to the distortions and incentives created, and should only be set at an above-cost level to allow the UFB build to be completed on time, Telecom said.

"That means we need to be confident that total copper price - if it is not to be set at cost - is set at least in close proximity to cost," it said.

Chorus, the regulated network operator spun out of Telecom in 2011, backed a total price of $45.92 in its submission.

Telecom said if the regulated copper prices are tweaked other options for fibre should also be considered, such as a better entry-level fibre service, downward adjustment to the price path for fibre products, or giving retail service providers unbundled fibre access earlier than the current 2020 date.

BusinessDesk.co.nz

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