Chorus 'Boost' service likely to breach rules, regulator advised

Chorus's [NZX: CNU] proposed Boost variant service would likely breach the terms of its regulation, according to legal advice received by the Commerce Commission.

The antitrust regulator is seeking feedback on a legal opinion by David Laurenson QC and James Every-Palmer, which took the view Chorus's plans breached its 'good faith' obligation, the commission said in a statement. The lawyers said Chorus's plans were inconsistent with the 'good faith' provision of its standard terms determination, in that they were an attempt to constrain the regulator service on the copper network, would hold back end-user throughput, and would define and constrain regulated services by Chorus's view of reasonable usage.

The commission is considering the extent to which the new variant services would complement or substitute existing regulated unbundled bitstream access services, what investment they would need, and whether the changes are consistent with the Telecommunications Act. The regulator will also consider whether the proposed changes, including the withdrawal of the VDSL and bandwidth management services, are allowed under existing regulation, and what the impact will be on consumers.

The commission sought the legal opinion after Spark New Zealand [NZX: SPK], formerly Telecom Corp, requested an investigation. In its submission on the Boost services, Spark said it didn't see enough commercial value in the variants to warrant a premium, and that combined with plans to degrade existing regulated service, breached the good faith obligation.

The regulator has given parties until Sept. 18 to comment on the legal opinion.

In a separate statement, Chorus said the commission's legal advice appeared to be "inconsistent with the regulatory guidance that is available" and that it highlights the complexity of the regulatory framework.

Shares of Chorus were unchanged at $1.78, and have climbed 24 percent this year after being punished in 2013 during the height of regulatory uncertainty regarding its copper-based services.

(BusinessDesk)