7 Nov 2013

Govt to get independent assessment on Chorus

9:07 pm on 7 November 2013

The Government is to have an independent assessment carried out on Chorus's financial position and its capability to deliver on its contract to roll out ultra fast broadband.

The telecommunications infrastructure company has said a Commerce Commission-ordered cut in what it can charge for others to use its copper network for broadband and phone services will jeopardise the ultra fast broadband programme.

Chorus has said the price ruling could jeopardise its ultra fast broadband programme.

Chorus has said the price ruling could jeopardise its ultra fast broadband programme. Photo: CHORUS

The regulator's ruling cuts the price Chorus can charge for its copper wire broadband and phone services by about $10 a month to $34.44 in December next year.

Chorus says the new price could cause it to default on its bank loan, jeopardise its $929 million dollar contract to roll out ultra fast broadband infrastructure and cost it $1 billion by 2020.

Chorus says it will cooperate with the review and it is confident that the asessment will reinforce what it has been saying.

Communications and Information Technology Minister Amy Adams says there have been a lot of commentators disputing Chorus's claims and the Government wants a robust understanding of whether the ultra fast broadband rollout is under threat.

She says if the programme is at risk, the Government will need to look at that and work its way through the issues.

"But before we take any steps we want to be very, very clear, both for ourselves and for wider New Zealand, the extent of what that risk is and that we act appropriately but no more than is necessary."

Ms Adams says an independent assessor will be chosen in the next few days and she expects the assessor to report back to her before Christmas.

She says if the investigation finds there is a danger the ultra fast broadband rollout is at risk, the Government will outline options to ensure it remains on track. These include bringing in another contractor, taking an equity stake in Chorus, or legislating over the top of the Commerce Commission.

The Labour Party says the independent review must not be what it calls a snow job that justifies a bailout by the Government.

Leader David Cunliffe says it should look back further than just Chorus's present situation and at why the ultra fast broadband contract is in such trouble because of a regulatory action that everyone knew was coming. He says if Chorus can't carry out the contract it should sell it to another player.

Support for review

The independent assessment is being welcomed by the Coalition for Fair Internet Pricing, which is campaigning for cheaper internet connections.

Spokesperson Paul Brislen says it is high time someone independent looked at whether there is any problem.

He says it should have been done before the Government's telecommunications review, which is now being challenged in the High Court.

Telecommunications company Callplus is seeking a judicial review of the Government's review of the Telecommunications Act, saying it should not proceed.

CallPlus says the minister needs to take into account ten factors including the level of competition in the market.

CallPlus chief executive Mark Callander says competition and its customers are being affected.

Meanwhile, credit ratings agency Standard & Poor's expects Chorus will probably breach covenants under its debt facilities from 2015 if the commission's ruling is allowed to stand.

Standard & Poor's and major ratings agency Moody's have put Chorus's credit rating on review for a possible downgrade. At present Standard & Poor's rates the company's debt at its investment grade BBB and Moody's at its equivalent Baa2 rating.

Telecommunications company Callplus is seeking a judicial review of the Government's review of the Telecommunications Act, saying it should not proceed.

CallPlus, which has filed proceedings in the High Court in Wellington, says the minister needs to take into account ten factors including the level of competition in the market. Chief executive Mark Callander says competion and its customers are being affected.