The Commerce Commission intends to maintain wholesale regulation in New Zealand until 2029, but technological developments may open the door to future changes in the rules
The Commerce Commission is currently determining the regulation that will cover the 2025-2028 period
On 27 August 2024, New Zealand’s Commerce Commission published its draft decision paper as part of its fibre deregulation review. The regulator states that, in its preliminary view, it is too early to consider the potential deregulation of fibre services. The country’s fibre networks were built by four regulated wholesalers in partnership with the Government under its Ultra Fast Broadband (UFB) initiative. Three networks – Enable, Northpower and Tuatahi – are now regulated via an information disclosure regime, introduced in 2022 by the amended Telecommunications Act. Chorus (as the largest provider) is subject to information disclosure and price-quality regulation. The Commission is also in the process of determining Chorus’s revenues and service standards for the second regulatory period, ‘Price Quality Period 2’ (PQP2), which spans 2025-2028. Additionally, on 22 August, the regulator issued its final decision on network expenditure that will see Chorus invest NZ$1.722bn (£811m) over the next four years, but protect consumers from NZ$172.6m (£81.3m) of “unjustified expenditure” that would have flowed through to higher prices.
Absent effective regulation, fibre providers could increase prices or reduce quality – or both
By law, the Commission must assess whether there are reasonable grounds to start a fibre fixed line access service (FFLAS) deregulation review before each new regulatory period – i.e. prior to the start of PQP2 on 1 January 2025. The regulator’s latest Annual Telecommunications Monitoring Report points to the widespread availability of fibre and fixed wireless access (FWA) services in urban areas, as well as increasing competition in rural broadband boosted by the presence of Starlink’s low Earth orbit (LEO) satellites. However, according to Tristan Gilbertson (Telecommunications Commissioner, Commerce Commission) the regulator does not consider – three years into the new regime – that there is enough of a competitive constraint on fibre for there to be any serious prospect of deregulation at this time. He stated that fibre providers occupy a “near monopoly position in their markets” and have the incentive and ability not to act in the interests of consumers absent effective competition from alternative technologies. The Commission is concerned that, if regulation was removed prematurely, fibre providers would be able to increase prices or reduce quality (or both) to maximise profits at the expense of consumers. Gilbertson stated that in the long-term interests of consumers and competition, it is therefore appropriate that current wholesale fibre regulation remains in place going forward. If the Commission’s draft position is confirmed in its final decision, deregulation would not likely be considered again before 2029.
4G FWA does not exert a sufficient competitive constraint on fibre, but 5G FWA could
Through the fibre deregulation review, the Commission has been acutely interested in changes in competitive conditions since the 2022 regime came into force as New Zealand transitions from legacy copper to alternative broadband and voice networks and services. Gilbertson stated that while 4G wireless broadband (or 4G FWA) is the predominant competing technology to fibre, it is unable to exert a sufficient competitive constraint on fibre – particularly given the increasing gap between what consumers want from their broadband service and what 4G FWA can deliver. However, despite playing down the role of 4G FWA, the regulator also said that it would be closely monitoring the development of 5G FWA services over the coming years. In its view, 5G FWA could narrow the gap between what most consumers want in terms of speed and performance and what wireless broadband can offer. As such, 5G FWA could be a “game changer”, although it remains at the early stages of deployment at present. The deadline for submissions on the draft decision is 24 September 2024, with cross-submissions on those responses due by 15 October.
