The Commerce Commission is drafting new rules that will apply to providers that built the ultra-fast fibre broadband network.
Background: The New Zealand Government’s ultra-fast fibre broadband (UFB) initiative was launched in 2009, and now aims to achieve FTTP to 87% of the population (including 1% private fibre) by 2022. Rural areas of New Zealand are covered by the separate Rural Broadband Initiative which improves broadband coverage to premises in rural New Zealand where it would not be commercially cost effective to build UFB networks. The Government contracted with four companies through to 2020 to build these fibre networks: Chorus and three local fibre companies (LFCs) – Northpower Fibre, Ultrafast Fibre and Enable Networks. In November 2018, Parliament amended the Telecommunications Act to require the Commerce Commission to develop a new regulatory regime for these fibre providers.
What the new rules look like: For Chorus, the Commission is proposing a revenue cap, which will limit the prices consumers pay for broadband, as well as minimum standards for service availability and network performance. Chorus and the LFCs will also be required to publish performance measures, such as profits, quality of service, and expenditure. This is colloquially known as ‘sunlight regulation’. The draft proposal also includes the permitted rate of return and the value of the assets on which the providers can earn a return (specifically, an asset beta of 0.49 and a market risk premium of 7.5%).
Next steps: The Commission’s draft is now open to consultation until 28 January 2020. The Commission will publish its final decisions on the input methodologies in mid-2020; it will then set the revenue cap and minimum quality standards for Chorus and the information disclosure regime for all providers in late 2021. The new regime will then be implemented from 2022.
