Judges probe as Chorus appeals Comcom pricing

Thursday 31st July 2014

Telecommunications infrastructure operator Chorus has opened its case in the Court of Appeal, challenging a High Court decision in April upholding the Commerce Commission's lower-than-expected regulated prices for broadband internet services delivered over the traditional copper wire network.

In opening submissions, David Goddard QC sought to argue the commission had failed in both law and logic when it set the price for unbundled bitstream access (UBA) service at $10.92 a month, far lower than Chorus had anticipated.

He faced sustained questioning from Justices Ellen France, Lyn Stevens and Douglas White on the merits of an argument that depends first on accepting the commission was wrong in the way it applied the price-setting methodology, and that the High Court then accepted those errors, making errors in law itself in the process.

The appeal is one of several strands of activity for Chorus as it attempts to roll back as far as possible regulatory constraints on its earnings, which it says will constrain its ability to fulfil its contract to roll out the the bulk of the government-backed national fibre-optic cable network to accelerate New Zealanders' access to ultra-fast broadband.

The commission is separately reviewing its price-setting methodology, also at Chorus's instigation, with final prices to be set by the end of the year, offering Chorus another potential avenue to achieve higher prices for UBA. It argues the new UBA prices, scheduled to kick in from December, are so low as to risk discouraging consumers from switching to cable-based UFB services, which was the original policy aim of the government's subsidised roll-out.

In reaching the price of $10.92 a month for copper-based UBA services, the commission had erred by setting the rate at the same level as applied in Sweden, which along with Denmark was chosen as a benchmark for establishing New Zealand prices, said Goddard. That was because the commission had concluded that an appropriate rate in New Zealand would be higher than Sweden's.

All three judges questioned that reading of the process and the requirements on the commission, with Justice Stevens challenging Goddard's contention that $10.92 a month was "logically incoherent".

If Goddard was right, that implied "it (UBA pricing) would be logical at $10.93, which rather points to the technical nature of your argument," said Justice Stevens, who suggested the legislation governing regulated price-setting ultimately boiled down to a matter of judgement.

"Yes," replied Goddard. "It is a matter of judgement, but the judgement must be one that isn't internally inconsistent or illogical."

The hearing is continuing.

BusinessDesk.co.nz

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