The Commerce Commission is seeking feedback on its draft decision to set Chorus’ total expenditure allowance at $1.59 billion over the next four years – 16% or $302.6 million below the company’s proposed expenditure for the next regulatory period (2025-2028).

This is the first in a series of decisions the Commission must make to set a new price-quality path – including the maximum revenue and minimum quality standards – for Chorus, as the country’s largest fibre network provider.

Telecommunications Commissioner, Tristan Gilbertson, says the Commission is focused on ensuring Chorus continues to invest efficiently ahead of demand for the benefit of Kiwi consumers. 

“We want to see ongoing investment in world-class infrastructure but are conscious that any expenditure we approve is ultimately borne by Kiwi consumers in the prices they pay for fibre services. That’s why the rules require Chorus to demonstrate that proposed expenditure is prudent and efficient.” 

Mr Gilbertson said that Chorus has not satisfied this expenditure test in a number of areas, resulting in a reduced level of approved expenditure in the draft decision – but with scope for Chorus to come back with further evidence to support an increase ahead of the Commission’s final expenditure decision.

The Commission is seeking feedback from stakeholders, including Chorus, on the draft decision, which is available along with supporting information on the Commission’s website.

Submissions can be made through the Commission’s infrastructure regulation mailbox. Submissions close at 5pm on 16 May 2024. The Commission intends to make its final decision on expenditure in Q3 2024, before finalising Chorus’ second price-quality path before the end of 2024.

Background

The Commission’s expenditure reduction of 16% is in addition to Chorus’ own reduction of $188.1 million reflecting a change in its approach to expanding its network. Chorus is proposing to continue to extend the network on a case-by-case basis using individual capex proposals going forward.

New Zealand’s fibre networks were built by four regulated fibre wholesalers in partnership with the Government under its Ultra-Fast Broadband (UFB) initiative. The other three regulated fibre wholesalers are Enable Networks, Northpower Fibre and Tuatahi First Fibre (previously Ultrafast Fibre).

These networks are now regulated through a price-quality and information disclosure regime, introduced in 2022 following amendments to the Telecommunications Act. The regime has the long-term benefit of telecommunication end-users at its heart.

The Commission set Chorus’ first Price-Quality Path (PQP) for the period from 1 January 2022 to 31 December 2024, on 16 December 2021. On 28 February 2023 the Commission determined the duration of Chorus’ second PQP as four years starting from 1 January 2025. The Commission is required to determine Chorus’ PQP for this second period before 1 January 2025.