ComCom on Chorus prices

The Herald reports:

Spark New Zealand has warned that prices could rise following the announcement by the Commerce Commission of a proposed new wholesale rates that Chorus charges retail service providers, including Spark.

“Today’s announcement is unexpected and we are now facing costs approximately $60 million a year higher than we previously anticipated. These higher costs will affect all our fixed services, not just broadband services,” said managing director Simon Moutter.

I see no need for price increases. The price announced by the Commerce Commission is around $4 a month more than its earlier determination, but it is around $6 a month less than what had been the status quo.

Moutter said intense market competition meant the anticipated reduction in wholesale broadband charges (signalled by the Commerce Commission as far back as December 2012), had already flowed through into retail broadband prices.

“For instance, what you get in our basic $75 broadband plus home phone plan today would have cost you $105 three years ago. In that time, our wholesale costs have barely moved until the new charges came into effect yesterday.”

Comparing any plan today to what it would have cost a few years ago is not very insightful. 20 years ago a broadband plan with 100 GB data would probably cost $5,000 a month. Data is always dropping in price.

As a consumer I would have liked the Commerce Commission to set the price lower, but their job is to work out what is the proper price for a monopoly utility service based on the cost of providing it. They’ve done that job now, and we should respect their independence.

However it would be useful if they had made a decision on whether the price level is backdated. ISPs do need certainty.