Chorus chief executive Mark Ratcliffe faced Telecom representatives as clear adversaries today, sitting across a table at the Wellesley Hotel in Wellington.
The hotel is the venue for a two-day conference organised by the Commerce Commission, which is seeking feedback on its December draft ruling to slash the wholesale price of copper broadband products by about $12 a month from December 2014.
Ratcliffe said the cut would knock about $160 million off Chorus' annual earnings but benefit Telecom by about $80m a year.
The proposed price cut to $8.93 a month would dissuade consumers from switching to the Government-backed ultrafast broadband network, putting at risk the "once-in-a-generation technology upgrade and transition to fibre", he said.
Ratcliffe sat stony-faced as Telecom regulatory affairs head John Wesley-Smith countered that Telecom had seen no evidence for that and told the commission it had got its sums "pretty well right".
Telecom said on Monday that it had signed up 1000 UFB customers since starting to retail the service to consumers in April.
Wesley-Smith said all the experience Telecom had gained selling fibre to customers and talking to them about the UFB network suggested they were willing to pay for UFB because it delivered a better broadband experience.
"Pricing relativities will have some effect on fibre uptake ... but whether copper services are $5 more than entry-level fibre services or $5 cheaper, or at parity, is very unlikely to be a determinative factor of UFB's success," he said.
Telecom believed the wholesale price of copper broadband connections should be "about $9 or $10" a month, he told the commission in an opening statement.
The Government has expressed concern about a big copper broadband price cut.
Communications Minister Amy Adams said this year the Government would bring forward a wider review of telecommunications regulation, which could override the commission's review of copper pricing.
Telecommunications Commissioner Stephen Gale opened today's conference by telling participants the commission would need to continue with its own price-setting work "at least until it becomes very clear when and how the law will change".
Ratcliffe said the proposed copper broadband price cut had "baffled" domestic and international investors.
"Perversely, regulatory risks for our business have increased following structural separation - the opposite of what was expected."
There had been a "dramatic flight" of international capital out of New Zealand as foreign investors cut their combined stake in Chorus from 75 per cent at the time of the Telecom demerger to 45 per cent today, he said.
Chorus was investing billions of dollars in UFB "ahead of demand", and that had to be financed from existing revenues, he said.
Ratcliffe said it was traditional to make a joke at Commerce Commission conferences, but "I don't think that the serious economic impacts that we are talking about today are at all funny".
In addition to Telecom, representatives from Vodafone, CallPlus, Consumer New Zealand, InternetNZ and the Telecommunications Users Association urged the commission to stick to its guns, saying it had little choice under existing legislation but to confirm the approach of its draft determination.
If the wider Government-ordered regulatory review does not save Chorus' bacon, there are two other chinks of light for the company.
Gale said the commission was seeking external advice from Boston economics professor Ingo Vogelsang that it had correctly interpreted its obligation to take into account the incentives to invest in new services when making its draft determination.
The commission is also expected to consider whether it should bump up the draft wholesale copper broadband price, which was based on overseas benchmarks, to take into account the fact that the average cost of providing copper broadband services may rise as customers quit the network and switch to UFB.
Lawyer Michael Wigley, representing Orcon, argued against that, saying the take-up of copper broadband was likely to remain "largely static" for at least the next seven years.
- ? Fairfax NZ News
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Source: http://www.stuff.co.nz/business/industries/8787198/Chorus-and-Telecom-face-off
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