The financial benefit her over-ride gives to Chorus … is simply not worth the risk to the integrity of a well-functioning regulatory processes and ought not be tolerated.
I had to deal with a special problem with one of my ewes last weekend.  She is close to lambing and was experiencing a prolapsed uterus.  It is an ugly condition and difficult to deal with.

Real sheep farmers call it a bearing, and you may be wondering what relevance it has with Amy Adams.  In the interests of the sheep’s well-being, I had to step in and deal with it – a matter of pushing the outside bits back inside the old girl and installing a retainer. My intervention affected nobody but the ewe and protects her ability to lamb successfully.

Amy Adams not so special problemWhich was quite different to Amy Adams for whom the special problem did not require her intervention.  Her intervention affects absolutely everybody and protects the party that she is not in office to protect.  Unless there is something about this matter that we do not know about.

Her issues centre on Chorus’ response to the Commerce Commission’s (Comcom’s) review of regulated wholesale prices for internet and phone services.  The regulated services that concern us here are the Unbundled Copper Local Loop (UCLL), and the Unbundled Bitstream Access (UBA).

The copper local loop is that part of the telephone network between our home and the local telephone exchange that has provided basic telephone service for so so long.  It became unbundled in 2006 when government regulation forced Telecom to face broadband competition fairly.

Comcom prices each service separately but as the Unbundled Bitstream Access (UBA) provides the electronics that run over the copper (UCLL) service, the prices for the two are inter-dependent.

The purpose of the price regulations is “to promote competition in the telecommunications market for the long-term benefit of end-users”.

Note that the focus is on end-users.  What Amy Adams has done is to put benefits to Chorus ahead of benefits to end-users.

In May of last year, Comcom published their draft review of wholesale monthly pricing for the UCLL.  That initial review provided for a near 20% reduction in the wholesale price.  Following a late submission from Chorus, it was replaced in the final determination by a mere 3.8% reduction.  Despite all of the telcos arguing for a bigger price fall, Chorus won that battle.

But the war was not over.  In December last year, Comcom released their draft price determination for UBA services.  As most broadband users utilise the UBA service, the loss in the UCLL area was replaced with a more significant price drop for the UBA service.

Again, all the telcos argued for a greater price drop.  Again Chorus argued for a price increase but it also threatened to invoke an allowed process that would likely delay the price change beyond the legally required date.

And so the Minister stepped in, ostensibly to give pricing certainty to the industry.  She also justified her intervention as being in the “…long-term interests of end-users.”

That long term interest is the government’s need to get us to use the UFB network.  It matters that people are not signing up for UFB fibre – uptake is languishing at around 3% where fibre is available.

People will sign up for fibre when they have a compelling reason to do so.  That reason will come.  Soon.

It is only a matter of time before a household’s video use, multiple connections for the kids homework, social media interactions and gaming make a move to fibre essential.

Actually, given that fibre costs no more than ADSL services, it is worth moving to fibre today just to avoid the after-school broadband slow-down.  If the service is available.

Where fibre is not available, Ms Adams’ logic is that users should still pay fibre prices for copper services.  It’s like buying a Toyota Corolla but paying the price of a Lexus.

In announcing her review of Comcom’s pricing process, she has pre-determined the UBA price, over-riding a proper and well-functioning regulatory process.

Wholesale prices for broadband services over copper compared to the UFB

wholesale price
set by regulation
Telecom
Separation
Comcom
proposed
May 2012
Comcom
determination
Dec 2012
Amy Adams
intervention
Aug 2013
UCLL – averaged $24.46 $19.75 $23.52 $23.52
 – urban 72.45% $15.82 $19.08  –
 – rural 27.55% $29.19 $35.20  –
UBA $21.46 $21.46 $8.93 proposed $13.98-$18.89
COPPER $45.92 $41.21 $32.45 proposed $37.50-$42.50
UFB  $37.50-$42.50  wholesale price increasing by $1 pa from 2015-2019 set by contract

We can see the impact of Amy Adams’ intervention from this table.  She is adding between $5.05 (+15.5%) and $10.05 (+31%) to what Comcom think the regulated wholesale price should be set at.  That addition goes straight to the bottom line of a public company.

Unlike my intervention with the ewe, which was necessary in the interests of the animal’s well-being, Amy Adams’ intervention on behalf of Chorus is neither necessary nor desirable.  Chorus do not need their well-being looked after, and certainly not to the cost of broadband consumers.

The financial benefit her over-ride gives to Chorus, for whatever reason, is simply not worth the risk to the integrity of a well-functioning regulatory processes and ought not be tolerated.