New regulatory regime for NZ fibre broadband networks

In BICSI Bytes, Newsby

The New Zealand Commerce Commission recently released its draft decisions on the design of the new regulatory regime for fibre broadband networks. The new regime will apply from the beginning of 2022, by which time most New Zealanders will have access to ultra-fast fibre broadband (UFB).

Commenting on the new regulatory regime, Telecommunications Commissioner Dr Stephen Gale said: “It’s our job to make sure critical national infrastructure, like fibre broadband networks, work for the long-term benefit of consumers. Our new regulatory regime for fibre aims to ensure quality fibre internet services are delivered to New Zealanders at an appropriate price, at the same time as incentivising providers to invest, innovate and run their networks efficiently.”

For Chorus, the regulation takes the shape of a revenue cap, which will limit the prices consumers pay for broadband, as well as minimum standards for things like service availability and network performance.

Chorus and the other local fibre companies (Northpower Fibre, Ultrafast Fibre, and Enable Networks) will also be required to publish performance measures, such as profits, quality of service, and expenditure, known colloquially as ‘sunlight regulation’.

Dr Gale continued: “This paper outlines our draft decisions on the ‘input methodologies’ – the building blocks of the regulatory regime. They include the allowed rate of return and the value of the assets on which the providers they can earn a return. We have also made draft decisions on the service quality dimensions that we will measure providers’ performance against. These are critical to the experience fibre consumers receive in areas like customer service, rectifying faults and the installation process.

“The Commission has made draft decisions on three key areas since its emerging views were published earlier this year. These include a new way of passing through to consumers the Crown subsidy for UFB, and higher allowances for risk in the allowed rate of return (specifically, an asset beta of 0.49 and a market risk premium of 7.5%).

“With consumers and businesses increasingly demanding ubiquitous, high speed internet connections to support an ever-expanding range of activities, it’s important we create a robust and enduring regulatory framework. We welcome feedback from stakeholders on our draft decisions over the coming weeks.”

The Commission will publish its final decisions on the input methodologies in mid-2020 before setting the revenue cap and minimum quality standards for Chorus and the information disclosure regime for all providers in late 2021.

The draft decisions papers can be found here.

An overview of the regulation of fibre broadband networks can be found here.

Submissions are due by 28 January 2020.

Alongside this work, the Commission is also creating safeguards to protect consumers as New Zealand transitions away from the copper phone and broadband network. These safeguards include that fibre is available to be installed at no cost to consumers before Chorus can choose to stop supplying copper services in neighbourhoods.