Commission Seeks Views On Revenue Limits And Service Quality Standards For Chorus

The Commerce Commission is seeking views on the approach to resetting revenue limits and quality standards for Chorus, the country’s largest telecommunications infrastructure provider.

Under the new regulatory regime for fibre, the Commission sets a ‘Price Quality Path’ (PQP) that limits the amount of revenue Chorus can earn from its customers, while setting minimum standards of service it must deliver to meet the needs of fibre end-users. This includes investing in service quality to ensure reliability and resilience.

The current PQP expires on 31 December 2024, and the Commission must set the next PQP – known as PQP2 – by the end of 2024 to cover the period 1 January 2025 to 31 December 2028. Each PQP is intended to incentivise Chorus to act in the best interests of consumers and promote competition in telecommunications markets.

Telecommunications Commissioner, Tristan Gilbertson, says: “Our ultimate goal is to ensure Chorus has incentives to continue investing ahead of demand and providing world class fibre services to Kiwi consumers.

“As we look to set PQP2, our focus is on ensuring that the right investment continues to be made at the right time to deliver benefits for users of fibre services. The regime allows for Chorus to push fibre into more remote and rural areas – beyond the current 87% footprint – if the expansion is underpinned by sound asset management principles and aligns with good telecommunications industry practice.

“Events associated with Cyclone Gabrielle, and other extreme weather events, have also highlighted the importance of investment to ensure infrastructure resilience. The regime allows this investment where there is a demonstrated case for it,” Mr Gilbertson says.

He says it is vital that Chorus has a robust long term asset management plan in place and provides the Commission with the information it needs for the PQP to be set to deliver the intended outcomes for Kiwis who rely on this infrastructure every day.

“The onus is on Chorus to ensure we have what we need to get the job done.”

The Commission is seeking stakeholder feedback on the issues identified in its paper with a view to publishing a draft decision on the second PQP by Q1 2024.

A copy of the paper can be found on the Commission’s website. Submissions close 5pm, Thursday 28 September.

Background

New Zealand’s fibre networks were built by four regulated fibre wholesalers in partnership with the Government under its UFB initiative. The other three regulated fibre wholesalers are Enable Networks, Northpower Fibre and Tuatahi First Fibre (previously Ultrafast Fibre).

These networks are now regulated through a price-quality and information disclosure regime, introduced in 2022 following amendments to the Telecommunications Act, which has the long-term benefit of fibre end-users at its heart.

The Commission set Chorus’ first Price Quality Path (PQP) for the period from 1 January 2022 on 16 December 2021. On 28 February 2023 it determined the duration of Chorus’ second PQP as four years starting from 1 January 2025. The Commission is required to determine Chorus’ PQP for this second period before 1 January 2025.

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