Regulator lets Chorus raise wholesale copper prices in final determination, won't backdate

See also: Chorus says ComCom decision will add $120m to annual operating earnings

UPDATED 10am: Regulator delivers $240 mln copper Xmas present to Chorus investors

The Commerce Commission will let Chorus [NZX: CNU] charge customers more to access its ageing telecommunications network from the price that's been in place since last year but won't allow the company to backdate those changes.

The regulator today released its final determination for what Chorus can charge on its regulated copper lines after a more rigorous process to find the price than the initial pricing principle review, which relied on international benchmarks. The price Chorus' customers will pay for wholesale access broadband service has been set at $41.69 a month, up from the $38.43 price signalled in its previous determination and the $38.39 level set in the initial round of price-setting, which came into effect on December 1 last year. However, Chorus isn't allowed to backdate the charges to last year, a decision that the regulator's commissioners were still divided on.

"Significant changes, such as the need to increase the amount of trenching required to physically lay the network and adjusting the make-up of fibre and fixed wireless connections, led to the final price rising," telecommunications commissioner Stephen Gale said in a statement. "This has been partially offset by other changes, including a decrease in the allowed rate of return for Chorus due to the fall in interest rates since July, and the removal of vacant properties from the model."

Chorus sought the fuller review for network pricing after claiming the original decision would force it to cut prices too steeply and put its investment in building a nationwide fibre network at risk. The Wellington-based telecommunications network operator is more optimistic the government will alter the regulatory regime for its fibre services when it completes a review of law overseeing the industry, and set for a 2020 start.

As Chorus's biggest customer, Spark New Zealand will bear the brunt of the charges, and has previously signalled backdating the prices would pose a risk to earnings and would probably be borne by the consumer.

Chorus shares last traded at $3.10, and have gained 17% this year, and Spark shares were last at $3.155, having increased 1.3% this year.

Graphic on Commerce Commission on copper line price increase (Click to zoom)

(BusinessDesk)