Chorus VDSL plans a concern, but no surprise

Friday, 1 August 2014, 12:48 pm
Press Release: Conversant

Chorus VDSL plans a concern, but no surprise

By Cameron Beattie

The recent proposal by Chorus for significant changes to the regulated unbundled bitstream access (UBA) services it offers, is both concerning, yet not surprising.

In May, Chorus announced a new set of commercial copper broadband products, including a next-generation VDSL offering, and that it plans to withdraw its regulated VDSL service.

Essentially however, these services will compete against the regulated UBA it also offers, as part of its commitments under the UFB roll-out.

This has led to complaints from ISPs resulting in the Commerce Commission launching an investigation into whether the proposed changes are an enforceable breach under the Telecommunications Act.

As a supporter of free-market economics, I support the idea of commercial products competing with regulated services, as this can result in greater innovation and better services for end users.

However, I agree with the Telecommunications Commissioner Dr Stephen Gale’s concerns that regulated services “must be properly maintained and not be eroded”.

The risk with the proposal from Chorus is that that is exactly what is likely to happen.

It is no secret that Chorus is under a great amount of pressure.

On one hand it is committed to a capital intensive roll-out of fibre to 75% of New Zealand and on the other, the regulated wholesale price of its UBA services is set to be reduced next year.

Chorus has warned such a price cut will cost it $1 billion.

Replacing the regulated VDSL service with a new commercial offering is clearly a move aimed at being able to better control the price of the service.

Considering the massive capital investment required by the UFB roll-out, Chorus’ motivation is naturally to drive as many people to fibre as possible.

It agreed to the UFB contract based on certain revenue assumptions determined by how many fibre connections it can sell.

However, under a new pricing regime, regulated VDSL could hamper fibre uptake.

The key problem for Chorus is that every $10 that comes off the retail price of VDSL will make it harder for fibre to compete.

For the vast majority of people the choice a broadband plan comes down to price. If they can get a plan with an acceptable speed and data allowance for $80 a month, most average New Zealanders will choose that over a faster $100 connection.

Most will see little value in paying more for the extra speed and bandwidth of fibre when a VDSL connection meets their needs. For many it would be like paying extra to have a 9 seater van when a four seater family car will do.

It is therefore not surprising that Chorus will do whatever it can to protect its bottom line and its investment in the fibre network.

And it’s here that the issue lies for internet users.

By replacing a regulated service with a commercial product, ultimately customers could be paying more for their internet access than they need to.

As an internet-based business, any changes that could result in higher internet access charges for New Zealanders is of great concern.

We therefore support the Commerce Commission’s investigation into Chorus’ proposals.

Cameron Beattie is Managing Director of Conversant – a provider of cloud-hosted communications systems, which enable businesses of any size to enjoy the benefits of an advanced PABX without having to buy the hardware.

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