The Commerce Commission is seeking submissions on proposed changes to its methodology to calculate Telecom's unbundled bitstream access (UBA) price, which is a regulated service under the Telecommunications Act 2001.

The changes proposed in today's draft determination are the result of two concurrent reviews being carried out by the Commission.

The UBA service allows telecommunications companies to supply broadband services to retail customers without the need to replicate Telecom's copper local loop.

The Commission is seeking submissions on its preliminary views that:

  • the methodology to calculate calling discounts should be changed   to more accurately reflect the discounts that Telecom customers receive when purchasing a bundle of services, and
  • the retail value should be used to calculate the data transmission component of the UBA price calculation rather than a cost-based value.

The Commission also proposes to update its calculation of Telecom's internet service provider (ISP) charges. The approach to overage and avoided cost discount remains unchanged.

Submissions should be made to the Commission by 5pm Monday 16 May 2011.

You can find a copy of the draft determination on the Commission's website:   www.comcom.govt.nz/review-of-uba-pricing/

 

Background

The Unbundled Bitstream Access (UBA) service enables access to, and interconnection with, the part of Telecom's fixed public data network  that connects the end-user's building to Telecom's first data switch (or equivalent facility) other than a digital subscriber line access multiplexer (DSLAM).

In December 2007, the Commission issued a standard terms determination (STD) under section 30M of the Telecommunications Act 2001 in respect of the designated access service of Telecom's UBA service.

The Act requires the Commission to determine the UBA price in accordance with the applicable initial pricing principle.     This principle stipulates that the Commission must impute the retail price for the UBA service having regard to the price of other broadband services and then deduct a discount benchmarked against discounts in comparable countries that apply retail minus avoided costs saved pricing in respect of the service.  

Using Telecom's retail broadband pricing data, the Commission determines the imputed retail price for the 'retail equivalent of the UBA service' by applying the following calculations:

  • calculates overage charges to be added to Telecom's retail broadband prices;
  • removes the ISP specific component;
  • removes the effect of bundled retail pricing; and
  • removes national and international data transmission not supplied by the access seeker (based on usage).

The Commission then subtracts from the imputed UBA retail price a benchmarked discount, which is currently 18 percent.

On 19 February 2010, the Commission commenced a review of the data transmission component of the UBA price under section 30R of the Act. After considering submissions received during this review, the Commission considered that a much broader review of the UBA pricing methodology and its components was required. On 3 March 2011, the Commission commenced another section 30R review of UBA pricing to consider the other UBA pricing components (and   related pricing matters) as considered necessary.