Commerce Commission releases consultation document for reviewing the price of Chorus' Unbundled Copper Local Loop Service

The Commerce Commission has today released a consultation document for the Final Pricing Principle (FPP) of Chorus’ Unbundled Copper Local Loop (UCLL) Service.  

This paper seeks views on the process that the Commission should take, as well as some of the key issues to address in setting the final price for the UCLL Service using the TSLRIC methodology. The UCLL service enables telecommunications providers to rent Chorus’ copper telephone lines to provide voice and broadband services to consumers.

The Commission received applications to review the price in accordance with the FPP from Chorus NZ Ltd, Telecom NZ Ltd, Callplus Ltd, Kordia Ltd and Vodafone NZ Ltd.  It is now a requirement under the Telecommunications Act 2001 to review the price of the UCLL Service by building a full cost model.

“We are interested in views about the timetable for this process,” said Commerce Commission Regulation Manager John Hamill.

“International experience suggests that the TSLRIC modelling process can take some years. Building a TSLRIC model is a complex task and we are aware that there are likely to be a wide range of views on the most appropriate way to apply the methodology,” said Mr Hamill.

“However, we are interested in whether there are circumstances in New Zealand in which a shorter process might be feasible or desirable.  This suggests that submitters should consider the trade-offs that may be involved in a shorter process.”

Another issue the Commission is seeking feedback on is the possible backdating of the reviewed price on completion of the process.

“The Court of Appeal’s observations favour backdating,” said Mr Hamill.

“However we are aware that this may have a significant impact on parties depending on the outcome of this review.”

The Commission is also interested in the technical issues around TSLRIC modelling and because of the complexity the Commission will be holding an informal industry workshop in mid-December to work through some of the key issues highlighted in the discussion document.

The Commission received an application from Chorus on Monday 2 December for a Final Pricing Review of the UBA Service. The Commission intends to issue a process and issues paper on the IBA FPP early next year. However the Commission has asked for views on how the UBA FPP impacts on this process.

Background

The Telecommunications Act (Act) requires the Commission to determine a price for the UCLL service.  In the first instance the Commission benchmarks prices against comparable countries under the Initial Pricing Principle (IPP).

In 2012, the Commission conducted a UCLL benchmarking review. The purpose of the UCLL benchmarking review was to update the benchmarking data in order to determine UCLL monthly rental and connection charges.  Our 3 December 2012 final price determination for the UCLL service:

determined the new geographically averaged price for UCLL as $23.52 per line per month, with the new price to come in effect on 1 December 2014; and
updated urban and non-urban UCLL, with monthly rental prices of $19.08 and $35.20 respectively, with the prices coming in effect immediately (that is, from 3 December 2012).
If a party is not satisfied with the results of the Initial Pricing Principle it has a right under the Act to ask the Commission to review the price by building a full cost model using the TSLRIC methodology as detailed in the FPP.  The Commission received applications to review the price in accordance with FPP from Chorus NZ Ltd, Telecom NZ Ltd, Callplus Ltd, Kordia Ltd and Vodafone NZ Ltd.