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ComCom took “straight down the middle” approach to pricing

ComCom took “straight down the middle” approach to pricing

“It's a bit like an old-fashioned table mortgage. It was a standard method.”

Despite various criticisms of the Commerce Commission's draft pricing review determination for Chorus' unbundled copper local loop service, Telecommunications Commissioner Stephen Gale says the review took a “straight down the middle” implementation.

“It's a bit like an old-fashioned table mortgage,” he says. “It was a standard method.”

One critic, Woodward Partners, has suggested that the draft prices have been carefully managed to fall into a desired zone.

“People will infer but they've glossed over the UBA price drop that stayed down when we did the modelling,” Gale says. “The other bit has gone up. They're two different calculations.

“Tera's model was crawled over by both sides.”

Tera Consulting, a European company, was employed to construct a full model of a hypothetical efficient operator's costs from bottom up using detailed topographical data combined with local costing expertise from Beca.

The commission also sought specialised expert advice from Professor Ingo Vogelsang, Dr James Every-Palmer, Dir Martin Lally and Oxera Consulting.

Gale says the budget for the whole project, including internal staff, is $2 million and he remains confident that won't be exceeded.

He concedes, however, that the commission needs to get moving on making a decision on backdating.

A paper resolving the timing of that will be out before Christmas, he says. It will also cover non-recurring charges.

The commission had gone to tender before choosing Tera. “It's a major industry in Europe,” Gale says. “The other parties have theirs (European consulting companies)."

Gale says it took a year to reach the draft decision because “we needed to consult with the industry about how to go about it."

Some parties have sought an extension to the period for commentary on the draft decision but Gale says he expects that a planned conference in March is still feasible.

“We're expecting a lot of debate, especially around things like the cost of trenching but we don't expect any radical changes," he adds.

A final determination will be made next year.

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