Spark warns of broadband price increases under proposed changes to telecommunications regulations

Broadband prices could go up under a revamp of regulations, Spark has warned. Picture / Supplied

Broadband prices could increase by up to $8 a month for every household and business in the country if a bill updating the telecommunications industry is passed unchanged, Spark has warned.

The industry player made the comments in a recent submission to the Economic Development, Science and Innovation Committee considering the Telecommunications (New Regulatory Framework) Amendment Bill.

The bill will establish a new utility-style regulatory framework for wholesale fibre-based services similar to that of the electricity lines industry.

Under the changes, telecommunications infrastructure provider Chorus - which owns most of the country's fibre network - will be subject to a revenue cap. That aims to give the company flexibility in setting the price for most of its products but ensures it does not earn excessive returns on its fibre assets.

Spark said while it supported a shift to a new regulatory model, Chorus was gaining concessions most New Zealand businesses would never enjoy – a guaranteed return on its fibre access network and annual price increases in a sector characterised by annual retail price drops.

John Wesley-Smith, Spark's general manager of regulatory affairs, told the committee the bill did not balance Chorus's interests with those of the rest of the industry and their customers.

"It's important through this process that we keep reminding ourselves what this change will mean for customers," he said.

Over the past decade New Zealand customers had the benefit of declining telecoms prices, in contrast to other utilities.

Under the utility regulatory model proposed under the bill, "the model is very likely going to result in annual regulated wholesale price increases in the foreseeable future".

"We can project forward with reasonable certainty that regulated prices for Chorus entry-level fibre broadband are going to be about $58 a month by 2025, so we're pretty well back at 2007 price levels," Wesley-Smith said.

"That's a $6 to $8 a month price increase for every New Zealand home and business relative to what they're paying today. That will be a new experience for some telecoms customers."

Spark and other retailers submitted that additional competition safeguards should be included to ensure Chorus could not use its guaranteed returns to enter and reduce competition in other telecoms markets.

Vocus Communications, whose retail brands include Slingshot, Orcon and Flip, labelled the combination of regulating only entry-level services and removing restrictions on Chorus's lines of business a "toxic cocktail" for competitors.

"Chorus will be effectively retailing in all but name," it said in its submission.

Chorus said a utility model would produce outcomes consistent with those in competitive markets and consumers would benefit as the regime ensured regulated firms could not over-recover costs and must maintain service quality.

The new regulatory framework is expected to be in place from 2020, when the first UFB arrangements end. The select committee, which received more than 170 submissions on the bill, is expected to report back on May 4.