Vocus slams Chorus fibre price hikes, Chorus responds
- 09 July, 2020 08:00
Telco Vocus, operator of the Orcon, Slingshot and Stuff Fibre brands, is labelling Chorus’ fibre price rises as "cynical, money grabbing and unwarranted".
Vocus' consumer and business chief executive Taryn Hamilton said the increases will likely hit Kiwi families in the pockets during a looming economic crisis and uncertain times.
“This is a profit grab, it’s not driven by a corresponding cost increase to run their business,” he said.
Chorus announced increases to the most common New Zealand fibre broadband plan which will equate to around $9 million a year, Hamilton said.
"Historically we have seen these increases passed onto consumers, and Chorus knows this. We asked them to reconsider the increase given the immense pressure Kiwi households are under, but they have refused."
Vocus said week Chorus this week emailed NZ retail service providers, saying feedback from five service providers all noted the uncertainty of the extent of financial impacts from COVID-19 and suggested it may be more appropriate if Chorus further delayed the proposed increase.
"After considering all feedback received, we have decided to proceed with the proposed price changes from 1 October 2020.”
Hamilton said that Chorus continued to operate in a monopolistic bubble, reaping higher margins than the retailers who face slim margins and shoulder all the risk of bad debt that a prolonged recession could bring.
Hamilton noted that Chorus recently proposed a "relief" package, but said this one-off offer was a drop in the ocean and failed to reflect the implications of a prolonged downturn.
It was lacking detail and appeared to be a cynical attempt to say it had helped retailers while putting up prices.
“A casual glance at the NZX would suggest that Chorus is doing rather well of late – all at the expense of the customer who will pick up the bill," he said.
Chorus in response said it was a highly regulated utility operating under a pricing regime designed to balance affordability of broadband for consumers with the need for ongoing investment in its strategically critical infrastructure.
Like most utilities, Chorus’ regulated pricing regime incorporates the ability to raise its wholesale prices by CPI once a year.
The inflation increases it was applying recognised that Chorus’ ongoing costs, including those of its service companies, also rise by CPI, the company said.
Despite this regime, Chorus has chosen to reduce several of its wholesale prices, including for gigabit fibre and for small business fibre.
The net result of the combination of some increases and some reductions was that retail service providers were likely to pay slightly less to Chorus over the next 12 months, the company said.
In addition, Chorus delayed its annual increase for three months to reduce the impact on retail service providers.
"Setting aside the wholesale prices that will reduce and offset any increase, the increase of around $1 a month for the 100Mb/s fibre plan represents about $7 million of annual revenue for Chorus," it said.
"For context, this is around a thousandth of the total revenues of retail service providers in New Zealand."
Putting through an increase of any form had not been an easy decision to make, Chorus added, and while it appreciated the challenges RSPs may face in a slowing economy, Chorus also needed to act responsibly regarding ongoing investment in the capacity and resilience of its infrastructure.
"The value of that investment in capacity to New Zealand has never been made clearer than during the lockdown, when usage surged."
For many years Chorus has invested more than 70 percent of its revenues back into capital investment to build world-class connectivity infrastructure.
"Now is not the time to start cutting back, and we believe most Kiwis will understand that ongoing investment in broadband infrastructure is a worthwhile investment to make."
Chorus said it had delivered three other initiatives to support New Zealand; making 10,000 connections free for six months for children to learn from home, spending more than $5 million topping up the Government’s wage subsidy to sub-contracted workers, and making a $2 million fund available to RSPs to reflect a potential increase in bad debt.
"We believe, on balance, that our decision to apply the CPI increase is fair, reasonable and the right decision for New Zealand."