Amy Adams hits back as "Axe the copper tax" coalition launches

UPDATE: ICT Minister Amy Adams has hit back at the Coalition for Fair Internet Pricing, launched this morning.

“From time-to-time, there are inflated claims made by various sector groups with their own view of the world," Ms Adams said when NBR ONLINE asked the minister for a response to the coalition's claims.

The Coalition objects to the government over-riding the Commerce Commission's proposed steep cuts to Chorus' wholesale homeline pricing. Ms Adams has proposed much more modest cuts, which the government will decide. The Coalition says  households will pay $600 million in extra broadband and phone line fees by 2020 (or around $150 extra per household per year), compared to what they would have paid if the original cuts had been pushed through.

Coalition spokeswom and Consumer NZ CEO Sue Chetwin denies the figure is inflated. “The government's proposal would introduce what economists Covec say is a new tax of at least $600 million on Kiwi broadband customers. Our independent economists have told us the tax is probably much more than $600 million, but we preferred to use the lowest and most conservative estimate."

And way call it a "tax"? Matthew Hooton, whose company Exceltium is providing comms for the Coalition, says "A tax is a cost the governement imposes on you to pay to another" - the "other" cost being the public-private Ultrafast Broadband (UFB) rollout, which is being running $300 million overbudget for Chorus.

Ms Adams says, "The simple fact is that under the government's proposals the price that New Zealanders will pay each month for their copper broadband will drop. Any suggestion to the contrary is absolutely incorrect.

Chorus has argued that cheaper copper broadband would hinder (already sluggish) uptake of fibre rolled out  under UFB scheme.

Ms Adams picked up on this theme this afternoon, saying  "At the same time as we are giving New Zealanders cheaper copper broadband, we are also building a world-class ultra-fast broadband network. It's the best of both worlds for Kiwis.

“What we are going through now is a once-in-a-many generation shift from one complete technology network to a replacement network, and the question that has been asked is whether the pricing framework is properly calibrated to deal with that transitional investment.

And although the government is poised to over-ride the regulator and set lines pricing itself, the minister adds, “We need to acknowledge that the Commerce Commission’s price-setting processes are still continuing and are also subject to appeal.  This could lead to two or three years of  litigation at a time when investors, retail providers and consumers are seeking certainty."

Ms Adams says she acknowledges there are some concerns with the government's proposal, but that a formal feedback process is already in place for her recently released discussion document.

Her office also added the barb that on August 13 last year the Commerce Commission indicated its recommended final prices were likely to be higher than the initial draft prices.

The Coalition says the government keeps changing the rules, and that it's problematic for the Crown to be both investing in Chorus (the Crown is buying $929 million in non-voting Chorus shares and interest free debt securities), and the company's regulator.

It also stresses that Chorus made a $171 millon profit last year.

Chorus responds
"The estimates used today are based on a draft price issued at the start of a long regulatory process," Chorus said in a statement this afternoon.

"That price has never been implemented and describing this as a 'new tax' is clearly misleading and incorrect," Chorus CEO Mark Ratcliffe says.

"The issue at hand is deciding the extent to which wholesale prices may decline, at the same time as ensuring that consumers continue to benefit from investment in high quality broadband infrastructure and investors get a fair return. That process is ongoing.

“Entry level fibre broadband wholesale price is significantly lower than the current copper broadband price, meaning that this initiative will also deliver savings for consumers."

InternetNZ - no benefit
InternetNZ sees no positive flow-on effect for the UFB.

The net effect of the government's proposals would be to transfer $600 million from Kiwi broadband subscribers into the pockets of Chorus shareholders," CEO Jordan Carter told members this afternoon.

"There is no benefit from this: no faster UFB rollout, no better services, no new jobs, no new investment. Nothing."

EARLIER: A new lobby group called the Coalition for Fair Internet Pricing launches in Wellington today at 12.30pm.

It's pushing for the government to go through with deep cuts to Chorus' wholesale copper phone line pricing suggested by the Commerce Commission last year - instead of ICT Minister Amy Adams' proposal for much more modest cuts.

The group claims Ms Adams' move is transferring around $600 million in potential household phone bill savings to Chorus' back pocket.