Reseller News

ComCom shaves 4% off NZX-listed Chorus' proposed fibre revenue cap

Telecommunications commissioner also suggests lowering recoverable expenditure.
  • Rob O'Neill (New Zealand Reseller News)
  • 27 May, 2021 08:12
Tristan Gilbertson (Telecommunications Commissioner)

Tristan Gilbertson (Telecommunications Commissioner)

Telecommunications commissioner Tristan Gilbertson is proposing the future regulated revenue cap for fibre network provider Chorus set around four per cent lower than Chorus proposed.

An estimated price-quality path for Chorus announced for consultation today would cap Chorus revenues for three years from 1 January 2022 at $689 million in 2022, rising to $786 million in 2024, in line with forecast demand. 

Chorus submitted a proposed a cap of $720 million to $820 million on 17 May.

The Commerce Commission’s draft also includes the expenditure that Chorus can recover over the regulatory period.

It proposes to reduce Chorus’ expenditure allowance across the period by $210 million, a 14 per cent reduction on Chorus’ proposal. 

However, Chorus may re-apply for some categories of expenditure included in this reduction via another mechanism.

After a long-running consultation, the new regulatory regime takes effect from 1 January next year, including minimum quality standards major ultrafast broadband operator Chorus should meet.

Chorus told shareholders this morning the draft decision and annual revenue range of $689 million to $786 million, including pass-through costs, remained broadly consistent with Chorus’ forecast fibre revenues for the period.

"However, today’s draft decision is based on Chorus’ recently submitted conservative RAB estimate of $5.5 billion and doesn’t reflect critical decisions yet to be made by the commission on the initial value of the fibre network," the company said. 

"Risk-free rate and inflation assumptions will also need to be updated when the commission makes its final decision."

Chorus CEO JB Rousselot said Chorus will review the commission’s decision carefully and a key focus area for its submissions will be ensuring the expenditure allowed could support the ongoing rollout and operation of the  fibre network.

Gilbertson said the commission’s role was to deliver the best long-term outcomes for New Zealand consumers.

“Our aim is to achieve a smooth transition into the new regime, by retaining the features that have made UFB such a success, while also putting in place the core components of building blocks regulation, which create incentives for Chorus to act in the best interests of consumers and promote competition in telecommunications markets,” he said.

The commission also outlined at a stakeholder briefing this morning its draft decisions on information disclosure requirements for Chorus and the three other regulated local fibre companies: Enable Networks, Northpower Fibre and Ultrafast Fibre. 

Information disclosure regulation requires all four regulated fibre providers to periodically publish information about their performance, pricing, expenditure and quality of service as well as financial statements so all interested parties can understand how they are performing individually over time, and when compared to others. 

“Information disclosure has proven to be a powerful tool in other sectors, such as electricity and gas, where increased transparency helps limit excessive profitability while ensuring services reach the quality demanded by consumers,” Gilbertson said.

The Commission is separately consulting on the initial value of Chorus’ fibre network at the start of the regulatory period, or what is referred to as its regulatory asset base (RAB). 

Its draft view will be announced in August.