Brook: Lights dimming on our “bright fibre future”

UFB will not only allow us to watch more television over the internet and download music and films, but it is also expected to increase economic activity and productivity thereby enabling New Zealand to keep pace with the exponential rate of technological development taking place the world over. You would be correct in calling it a key investment for our future then.

Chorus, a telecommunications infrastructure company that was split from Telecom in November 2011, is charged with undertaking a large proportion of the fibre installation project. It has already started the arduous task of delivering fibre to more than 830,000 premises across New Zealand, a process that is expected to cost around $2.5bn. This rollout is complex and expensive and whilst Chorus is hitting its milestones, cost reductions and operating efficiencies will need to be made.

Unfortunately for Chorus, this mammoth undertaking is not its only task. While we all wait for UFB to be delivered to our homes, schools and businesses, we currently consume most of our internet and landline usage over copper based lines. Chorus also provides and maintains this infrastructure which accounts for over 80 per cent of its revenue, predominantly through fees paid by Retail Service Providers (Telecom and Vodafone etc) for the use of those lines to provide us with our home phone and internet packages. 

These services have been the subject of much scrutiny this year. The Commerce Commission has set about the unenviable task of updating the wholesale prices charged to access these services. Changes are made to reflect changes to the copper network, changing input costs, new international benchmarks, inflation and the creation of Chorus as a standalone entity. It is a delicate balance for the regulator to ensure that consumers are getting the best deal for their current services while also incentivised to move to UFB, and the service provider can maintain reasonable returns. This balance has been difficult to achieve and it has been Chorus, and in turn Chorus’ shareholders, that have borne the brunt of the uncertainty created throughout the process.