Can we call it the Chorus Crisis yet?

I’m sitting here in #gigatownporirua putting the finishing touches on TUANZ’s submission to the Commerce Commission on Chorus’s proposed ‘Boost HD’ unregulated copper products when my inbox is filled with the announcement of the deal made by CFH and Chorus to provide essentially an advance of $178 million in the event of the current ComCom process not going Chorus’s way.

In fact this is the first time I have seen the possibility of the FPP copper price coming out under the commissions IPP price. There are other penalties for Chorus as well including a higher interest rate and no dividends until 2019.

While the Minister has come out and welcomed this ‘progress’ it must be galling to see UFB funds now being sanctioned to fill a copper hole. The last thing the Government wants right now is for one of its original flagship policies to be perceived as being in trouble.

I think its important to put all these things in context, the UFB is vital to NZ’s future and after listening to ministerial presentations at KANZ last week, I think we’ve actually got the big picture pretty much right. It was put to me yesterday that actually telecommunications in NZ is pretty good, we’ve got some of the worlds best mobile networks and soon we will have residential gigabit broadband.

But we do have a problem and that is Chorus and its business model, financing the UFB build out of copper revenues was always going to require a skilful balancing act, matching tomorrows network build against todays copper revenues. Add into that mix the inevitable shift from ‘retail minus’ to ‘cost plus’ pricing that was predicated by the structural separation of Telecom and its clear that the current situation should have been foreseeable.

So is time to start the other copper conversation and that is what is the ultimate fate of the copper network? will it run in parallel for the foreseeable future? should the copper be rolled when fibre is installed? do we need a copper switch off date say 3 years after fibre becomes 100% available (as in Whangarei).

All of these are valid questions that are already being asked around the telecommunications world, as well as that what happens to all those New Zealanders who will still be dependent on copper connections after the UFB is finished? I know I’m hearing frustration from small communities to whom neith UFB nor RBI apply, they’re getting frustrated with inadequate broadband, yet because it meets the minimum requirements of the Telco Act Chorus say they have no plans for further investments or upgrades.

I think we are going to watch the Chorus situation play out like an inevitable slow motion train wreck. The Government like it or not will be drawn in and the options will all be unpalatable.