Chorus tells High Court it wants regulator's pricing review set aside

Tuesday 18th March 2014

Chorus, whose shares have tumbled 53 percent in the past two years because of price cuts imposed by the regulator, wants the Commerce Commission's review of network pricing set aside, the High Court heard today.

The network operator told Justice Stephen Kos that it wants the initial pricing principle (IPP) process for its unbundled bitstream access services set aside and for the regulator to go back to the drawing board.

The Commerce Commission has ordered Chorus to slash prices for access to its copper lines, a move the company says will undermine its profitability and its ability to build the government-sponsored fibre network.

Chorus counsel David Goddard QC told the High Court in Wellington that the IPP process could be restarted without hindering the move to a more robust price review.

Justice Kos said he would have "serious reservations" about setting aside the review and ordering the process to start again.

Chorus's share price has slumped since November 2012, when the Commerce Commission first made public its view that regulated prices should be cut. The shares rose 1.2 percent to $1.70 on the NZX today.

The stock selloff should have told the regulator the market didn't anticipate the size of the proposed reduction in pricing, and made it consider section 18 of the Telecommunications Act, which aims to protect innovation and investment in the sector, Goddard told the court yesterday.

The regulator also should have considered what impact regulatory shocks might have on the wider market, and should have telegraphed its thinking, he said.

Chorus is appealing the commission's final determination in November last year setting the unbundled bitstream access monthly price at $34.44 per line, up from the $32.35 price initially mulled in its draft decision, with the additional UBA component accounting for $10.92 and the unbundled copper local loop accounting for $23.52.

Goddard told the court yesterday that the regulator erred in law when setting the price Chorus can charge for access to its UBA services in that it didn't have any evidential basis to narrow its inquiry and ignored a section of the legislation aiming to support the government's goal of building a nationwide fibre network.

BusinessDesk.co.nz

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