Appeal Court dashes Chorus's bid to overturn price ruling

Monday 8th September 2014

The Court of Appeal has dismissed Chorus's bid to overturn a decision upholding proposed cuts to the regulated pricing of services over its copper line services.

Justices Ellen France, Lyn Stevens, and Douglas White turned down Chorus's appeal of a High Court decision, saying the Commerce Commission didn't err in law when setting the prices the telecommunications network operator can charge for unbundled bitstream access services, according to a judgment released today. Chorus asked the Appeal Court to set aside a High Court decision in April, which upheld the way the regulator came to its decision using international comparisons in what's called an initial pricing principle.

Chorus had a "high hurdle" to cross in trying to prove the way the commission applied the law was factually incorrect, and that it wasn't for the courts to evaluate the regulator's decisions, the judgment said. The network operator didn't challenge the fairness of the regulator's consultation or the commission's interpretation of the statutory provisions.

In turning down Chorus's appeal, the judges said the commission proceeded correctly in evaluating and selecting a price point for the UBA service, and carefully considered the differences between comparing benchmark countries and New Zealand.

"In particular, we do not accept that the commission's determination was made without any proper evidential basis or on the basis of erroneous assumptions or inferences," the judges said. "Nor do we accept that the commission exercised its judgment in a way that contradicts the true and only reasonable conclusion available on the facts or was factually unsupportable."

The Appeal Court bench also didn't think the regulator constrained itself with limited benchmark set, and recognised it could go outside the range if it needed.

The judges also dismissed Chorus's claim the commission didn't consider the section of the act aiming to minimise the risk regulation would have on investment and innovation in the sector, saying it was clear from the decision to "err on the high side" that it took the provision into account.

"Once again we do not accept that the commission exercised its judgment on this issue in a way that contradicts the true and only reasonable conclusion available on the facts or was factually unsupportable," the judges said.

The bench ordered Chorus to pay costs for the Commerce Commission, Vodafone New Zealand, Spark New Zealand and Orcon, who also appeared at the July hearing.

The appeal was the latest in Chorus's attempts to push back against the commission’s final determination in November last year setting the UBA monthly price at $34.44 per line, up from the $32.35 price initially mulled in its draft decision. That was composed of $10.92 for UBA, which facilitates internet services, and $23.52 for the unbundled copper local loop, used for voice telephony. The UBA service allows internet retailers to use Chorus’s components on the copper lines without having to replicate them.

In a separate statement, Chorus said it was disappointed by the decision, but that it was "not entirely unexpected." The network operator will review the Appeal Court judgment thoroughly, it said.

Shares of Chorus were unchanged at $1.77 on Friday, and have gained 23 percent this year, having been punished last year when the regulatory risk was at its highest.

BusinessDesk.co.nz

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