Chorus chairman lays down the law to ComCom

Chorus chairman Patrick Strange. Photo / File

Chorus chairman Patrick Strange went on the front foot at his company's annual meeting, saying global investors would not back future New Zealand infrastructure projects if the Commerce Commission did not allow his company to make a decent return under new legislation that kicks in next year.

A refresh of the Telecommunications Act, which will be phased in between 2020 and 2022 will treat Chorus like a utility, capping its revenue.

But Chorus and the Commerce Commission, which will set key operating parameters under the new regime, are currently at loggerheads over a number of issues, including the crucial element of the weighted cost of capital. Another is the pricing terms on which Vodafone, Vocus and other retailers will get access to Chorus' fibre network - allowing them to "unbundle" it or add their own electronics to give themselves more freedom over features and pricing.

Strange said the public-private Ultrafast Broadband (UFB) rollout could be a model for future investments in other parts of the economy at a time when Treasury said $130 billion needed to be spent over the next 10 years on various infrastructure projects.

But he said if the Commerce Commission was too tough on Chorus as it made key regulatory decisions over the next 12 months, international investors who had been waiting a long time for a pay-off from the UFB will be turned-off New Zealand (some 80 per cent of the UFB rollout will complete in December with the "UFB 2" extension due to wrap up in 2022).

Investors are hoping once the capital-intensive rollout is over, Chorus will be able to reap the rewards.

"These international investors, including many of our current shareholders, are watching the Chorus regulatory process very closely," Strange said.

"If they sense they're not going to get a fair return … the reality is that will be the last investment they make in New Zealand infrastructure," Strange said.

Another investor concern is pending upgrades from Spark, Vodafone and (down the track) 2degrees to 5G mobile networks that have been pitched, in some cases, as an alternative to fibre.

Strange did not mention 5G by name, but said retail providers had to offer consumers "clear and realistic comparisons."

"We've been reluctant to call things out," Strange said. "We will in future call things out."

The chairman also addressed recent reports of UFB fibre installations gone wrong.

"It's no secret that the huge and unforecast early takeup of fibre took us by surprise and did stretch our capacity in the early years," he said.

But he said Chorus had made "huge strides" over the past two or three years.

He said "we're not perfect" but said mistakes were now rare. He asked for show of hands from the audience but was taken aback when he got a thumbs-down from one person.