Telco watchdog opts not to regulate backhaul services

Telco watchdog opts not to regulate backhaul services

Good news for Chorus and other local fibre companies

Telecommunications commissioner Dr Stephen Gale

Telecommunications commissioner Dr Stephen Gale

The Commerce Commission will not intervene in the backhaul marketplace, but said it will continue to monitor prices and terms.

Telecommunications commissioner Dr Stephen Gale said that the commission had found that the backhaul market is generally competitive except in some provincial areas where Chorus is the only provider and some links are more expensive.

Telecommunications retailers buy backhaul services from providers such as Chorus, to handle internet traffic between homes or businesses and suburban exchanges, and from a range of network providers to carry the traffic between the suburban exchanges and the retailers’ international gateways and content servers. 

Mobile operators buy backhaul from cell sites to their gateways and servers.

For the provincial links where it has a monopoly, Chorus has chosen to use a regulated pricing formula set by benchmarking in 2008. 

"The relevant links are longer and carry less traffic but we expected that updated cost benchmarks would now be lower,” Gale said.

“Even so, we don’t propose to regulate at this point."

The higher backhaul charges were having only a minor effect on nationwide retail broadband prices, he said.

Also, the Ministry of Business, Innovation and Employment will publish a suite of new fibre regulations this year under Part 6 of the Telecommunications Act

"The new regulations may bring some of the relevant backhaul services under Chorus’ overall revenue cap, come January 2022.”

The Commission found several anomalies and errors in Chorus’ backhaul service offerings and Chorus has announced it will review its backhaul portfolio.

“We will consider the need for new regulated backhaul services in a review that we are required to undertake some time before 2025," Gale said.

"The timing of the review will depend on the coverage of the new Part 6 regulations and on the extent to which Chorus uses its review to rationalise and explain its backhaul service options and pricing."

It has been a busy week for the regulator, who yesterday formally warned ISP New Republic for failure to meet its statutory obligations to provide information needed to allocate the Telecommunications Development Levy.

Comcom launched its study into backhaul in August 2016 to better understand the current state of backhaul services, what they might look like in the future, and whether change may be required to the regulatory framework to better promote competition in the long-term.

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Tags regulationbackhaulChorusCommerce Commissionlocal fibre companies

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