COALITION FOR FAIR INTERNET PRICING

MEDIA RELEASE

18 OCTOBER 2013

Submissions Overwhelmingly Oppose Government’s Copper Tax

Seventy percent of submissions to Communications and IT Minister Amy Adams’ controversial telecommunications review condemn her proposal to price gouge Kiwi households and businesses to deliver super profits to copper network monopolist Chorus, the Coalition for Fair Internet Pricing said today.

“Pretty much everyone, including large and small telecommunications companies, farmers, students, unions, the elderly and Maori, is saying loud and clear that Ms Adams has got this one wrong,” a spokeswoman for the coalition, Sue Chetwin, also chief executive of Consumer NZ, said today.

The coalition was commenting on its initial analysis of the submissions released yesterday by the Ministry of Business, Innovation and Employment (MBIE).

The proposed price gouging has been conservatively estimated to transfer between $390 million and $449 million from Kiwi households and consumers to Chorus, which would then enjoy super profits of over 20% annually from its copper network.  Chorus has made additional demands that would increase the price gouging to at least $979 million between 1 January 2015 and 31 December 2019.

“It is outrageous for a government to even consider riding roughshod over the independent regulator, the Commerce Commission, to allow a monopolist to price gouge Kiwi households and businesses by hundreds of millions of dollars so it can make super profits of over 20% return on investment,” Ms Chetwin said.

“We have said from the start we oppose the very fact of this so-called Telecommunications Review, because we believe monopolist pricing must be regulated by the independent Commerce Commission and not by politicians.

“However, if Ms Adams feels she has to persist with her review in the face of such overwhelming opposition, she has a duty to consider the submissions with an open mind and in good faith.  We will be ensuring that she is held to those standards.

“She must certainly not make any decisions based on the prime minister’s inaccurate suggestion that Chorus is at risk of insolvency if the copper tax is not implemented. Analysis by Vector demonstrates conclusively that this whole issue is about helping Chorus to make super profits out of copper.  Any suggestion Chorus is at risk of insolvency is false.”

Among those critical of the proposed copper tax or who have raised important issues are Vector, the Employers and Manufacturers Association, Federated Farmers, the New Zealand Council for Infrastructure Development, the Commerce Commission and CallPlus.

Vector argues “the proposed Government intervention would result in a substantial and continued wealth transfer from consumers to Chorus.”

The Employers and Manufacturers Association states “the proposed pricing described in the document, if undertaken by a commercial enterprise, would normally be held to be price fixing under the Commerce Act”, and confirms setting minimum prices for copper would not guarantee UFB take-up.

Federated Farmers opposes Government intervention in the pricing process, and says “it is important the price setting mechanism is retained by the Commerce Commission”.

The New Zealand Council for Infrastructure Development expresses concern that the proposal “sets a precedent that Governments can interfere at will with an independent regulator’s decision” and creates structural uncertainty not limited to telecommunications.

The Commerce Commission made clear in its submission that it disagrees entirely with the proposed change in methodology in how copper prices would be set.

CallPlus advised the minister in its submission that the government's proposals could drive it and other retail services out of business. This risks the emergence of a new duopoly.

In total, 70% of the submissions are critical of the copper tax.

Submissions in favour of the proposal are from Chorus itself, WEL Networks, Enable Services, fund managers, and a sole member of the public.

Chorus says it supports the proposal to override the Commerce Commission in its favour, while Enable Services Ltd wants slower copper-access prices to be equivalent to prices for faster fibre services.

The Coalition for Fair Internet Pricing was founded by Consumer NZ, InternetNZ, and the Telecommunication Users Association of New Zealand (TUANZ) and is supported by CallPlus and Slingshot, the Federation of Maori Authorities, Greypower, Hautaki Trust, KiwiBlog, KLR Holdings, National Urban Maori Authorities, New Zealand Union of Students’ Associations, Orcon, Rural Women, Te Huarahi Tika Trust and the Unite Union.

A Covec study for the coalition, which has been peer reviewed by Network Strategies and found to be conservative, concluded that the government’s proposed copper tax would cost Kiwi households and businesses between $390 million and $449 million between 1 January 2015 and 31 December 2019 over the price for copper broadband and voice services that Commerce Commission work indicates is fair.  The latest demands by Chorus would take this cost to Kiwi households and businesses to $979 million.

ENDS

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