NZ is the only country where Internet access is getting more expensive

Spark, Vodafone and Callplus together represent 94 percent of the residential internet market and all have put up their prices for home internet packages.

Internet service providers blame the rises on the Commerce Commission’s recent draft decision which reduced the price companies pay for use of the copper wire network.

The charges relate to what Chorus (the wholesaler) charges internet service providers and telcos like Spark, Vodafone, Orcon, Slingshot and Flip, for accessing their copper infrastructure which was deployed years ago by the Post Office. Those wires run down almost every street in the country and are the phone lines we have been using for decades.

Because it is a monopoly, the price that the wholesaler can charge is regulated by the Commerce Commission.

In 2011, when Telecom was split into a retail arm (Telecom) and a wholesale arm (Chorus), the Commission had to work out what Chorus’s wholesale services were worth, and what price they would charge internet service providers and telcos, including Telecom (now Spark) to use those services.

The price was originally set at about $45 per customer per month.

After changes to the Telecommunications Act in 2011 – which required a new model for setting the price to be adopted – the Commission came up with a figure using international benchmarks – comparing New Zealand with other similar countries that sell similar services.

As a result of that it released what it called its interim price in 2012 which it calculated at $33.44 per customer per month.

But while Chorus argued that price was too low, retailers felt it was too high. So in 2013 the Commission embarked on a final pricing principle, recalculating the figure, based on what it would cost Chorus to build a new network in New Zealand similar to what is already there.

It then calculated what Chorus is allowed to charge based on that network build costing.

The Commission had intended to reduce the price from $45 a month to $33.44 but decided to settle on a figure of $38.39.

The telcos have already worked the $34 price into their assumptions and have now adjusted their prices to reflect that final higher price.

Spark, Voda et all worked their pricing on the expectation of a lower cost, but now have to shift about $5 per per month per connection onto the consumer to compensate.

Chorus and the Commerce Commission have essentially screwed us over.  There should be an access charge that reflects the ongoing cost and maintenance with a suitable margin.  To base it on the present day value of completely replacing the copper network is just absurd.

It is rather interesting that the Commerce Commission has acted in a way that rewards one monopoly at the expense of it’s customers, and in the end, all of us who finally are paying for it.

Remember though that this is the same Commerce Commission who despite more than 90 complaints about  Countdown and their mafioso tactics with suppliers decided to emulate Helen Clark and declare that there was “nothing to see here, time to move on”, also ignoring the slew of prosecutions underway in Australia for the same tactics and behaviours.

Basically the ComCom has tits for hands , and if brains were dynamite they wouldn’t have enough to blow their nose.

 

– RNZ

 

 


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  • KGB

    I live on State Highway 1 and copper runs past my driveway. I have been on a 3 year waiting list for 1 year, yet calls to Chorus recently tell me I still have a 3 year wait. So for rural NZ’ers 3 years is probably a standard response, not an honest indication. I pay $70 a month for 10GB of wireless broadband. Family devices over Xmas cost an extra $70 of usage. We have 3rd world internet access in rural NZ and they want to charge more for it?

    • Yeah, right, whatever…

      I returned to NZ 9 months ago after 2 decades living in Germany. At the time I left I was paying NZ$70/month for internet & telephone, which included:
      1. Internet flat rate with 100 MBit/s download speed and 40 MBit/s upload
      2. Telephone flat rate to most of the Western World
      3. 5 phone lines
      4. 5 email addresses
      And this was with German Telekom, who are not the cheapest internet service provider. And I understand that recently prices has dropped 20%
      Here I am paying NZ$130 for (slow) internet flat rate and 1 phone line with free local calling.
      Go figure…

      • Just a thought …

        Absolutely – I just had high speed broadband installed and can’t pick any substantial difference except for the high-speed route to my bank account by the telco’s ……

        ed . grama

      • JMC7

        Yes, I had a similar price and service from BT in the UK. Absolutely appalling service from Spark, 3rd world speeds for a world-class price.

      • damm good thrashing

        I guess you returned to New Zealand for other reason then?

      • abbaby

        I was talking on video cellphone calls in Korea ten years ago. Calls were less than 3 cents per minute, unlike 45 cents here. I always thought it was economies of scale but I now think there is a lot of corporate greed in NZ.

  • Tony Norriss

    My understanding is that the price increase only affects the copper cable, and so it shouldn’t affect the pricing for the fiber as in the ultra-fast broadband roll out. So increases in pricing on copper cables may encourage people to take up the fiber. This will hasten the end of the copper network.

    Approx 20 years ago my company had a contract with Telecom for servicing the compressor/air dryer units that serviced the copper cable nation wide. The copper cable runs through a sheath that must be kept inflated with dry compressed air to prevent degradation of the system from water intrusion. As can be imagined, with the age of the system, it tends to spring leaks all over the place that require constant attention. So, it is very expensive to keep maintained.

    As I recall, Telecom back at that time, Telecom were tossing up whether or not to start wholesale replacement of the copper with fibre. Then ADSL came along which allowed them to provide internet without having to upgrade the network. This was probably a profitable short-term option. However, the copper network is probably requires even more maintenance than it did when we were involved. So, it is probably fair that the price signal should encourage the uptake of fiber.

    • Arnie

      That’s providing fibre will come to everyone that has copper, which it will not. Therefore paying to replace the whole system rather than R & M and certain upgrades is crazy, but what else can we expect from overpaid bureaucrats.

  • cows4me

    What’s new, NZ is the land of the rip off. From fuel, building materials, local government, communications , everyday consumer products. Nothing unusual here just business as usual.

  • We have plenty of government agencies like this. They huff and they puff…and then nothing. They love to come up with ‘grand ideas’, but seem to have no real interest in practical details. You get this with the Commerce Commission (so it’s okay for IAG to control more than 50% of the market? It’s okay for WIlson to own most of the carparks in NZ? It’s okay to price Chorus’s services based on rebuilding a network nobody would now build?). You get it from the Local Government Commission (Auckland isn’t really working, why not proposing something similar for Wellington?). Need I go on? (I have plenty of more examples, sadly).

  • Sceptic59

    Got advice from Vodafone that my fibre goes up as well

    Outstanding!

    • ex-JAFA

      Send them a table of the elements with copper and silicon highlighted so they can see the difference.

  • Dave_1924

    the Comcom’s incompetence in driving the pricing model is undoubted. Messed the market around and messed the RSP’s around as well…

    They have, in my jaundiced view, made some insiders a lot of money I suspect buying and selling Chorus shares… go have a look at the price movements and ask yourself why did the CNU price start tracking north steadily in the run up to the announcement of the shift upwards of the copper prices…. straight after the announcement CNU when north to the tune of 50-60 cents a share and I suspect a few made a killing… dodgy dealings methinks…

  • I am with Now a Napier based ISP and they have told me no price increase in spite of what the others are doing.

  • Wallace Westland

    Yeah, I don’t know about this, the way I see is that what Spark and Vodafone did was pressure the commerce commission (a private NGO) into a lower pricing regime by loudly spouting off to the media that this would bring added benefits (discounts) to consumers. Of course the discounts were never going to come and instead both Telco’s projected profits were based on the initial price setting.
    Chorus took umbrage at the fact that in it’s negotiations for UFB it had been given a guarantee from the Government of the lowest price it would be able to sell it’s copper network for and the CC’s price was lower.
    Chorus owns the network, during the split they also acquired all of the old Telecoms debt which is now carried by it’s current shareholders and Telecom went away a brand new debt free entity.
    These guys want there cake and to eat it too but If the copper price is too cheap people won’t switch to UFB and billions of dollars will be wasted.
    Plus what many are not aware of is despite the fact that Chorus got 1.6 billion to built the network it is not a gift it’s a loan and must be paid back. Add to that Chorus has also stumped up a billion dollars of it’s own money for NGA and the Telco’s spin on it is a bit rich especially when we consider Chorus is a NZ owned company and Vodafone certainly is not.
    On top of that Spark which owns the major telephone exchanges and has it’s equipment already installed in all of Chorus’s is the only provider that cannot supply VOIP and is under extreme pressure to hurry up and get it sorted as for now during provisioning of NGA Next Generation Access(UFB from the street) the service companies are required to bring in a hybrid cable, fibre with a copper wire inserted so Spark customers can get telephone service.
    Disclaimer: I am not a Chorus employee nor do I have any connection to Chorus apart from as a an inducted contractor doing relatively minor civil works.

  • abbaby

    I was talking on video cellphone calls in Korea ten years ago. Calls were less than 3 cents per minute, unlike 45 or 50 cents here! I always thought it was economies of scale but I now think there is a lot of corporate greed in NZ.

  • Grendel_from_the_dead

    Been jm nepal for the past 10 days. Got a sim with 10gb of mobile data plus a bunch of free calls fpr 4500 nepalese rupees Or about 60 nzd.

    To add 1.5gb to my mobile plan for the month is about 29 nzd.

    I was in a city (bhaktapur) that is 700 years old the other day (with rolling power cuts and no street lights) and was getting download speeds on my phones hotspot faster than i get them in wellington.

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