Chorus chief executive Mark Ratcliffe said reducing copper-line prices would also significantly reduce uptake for fibre internet services on the Government's ultra-fast broadband network.
Ratcliffe said the company would be talking to the Government "about the apparent policy disconnect".
Prime Minister John Key weighed into the matter yesterday afternoon, saying the draft determination appeared problematic.
The commission's proposed cuts followed another announcement it made on wholesale prices in the telecommunications market yesterday.
In this first announcement, the commission finalised the amount internet companies pay Chorus to rent copper lines, known as the unbundled copper local loop (UCLL).
Chorus indicated the decision would hit its ebitda by $20 million a year.
Together with the UBA draft decision, Chorus said the regulation could require it to "fundamentally rethink its business model, capital structure and approach to dividends".
As a result of the UCLL announcement, internet companies will now pay $19.08 a month to access lines in urban areas, which they then use to sell broadband and phone services over.
The price for monthly access for non-urban areas has been set at $35.20 a line. From December 2014, a new nationally averaged monthly rental of $23.52 will apply in all areas - a cut of 3.85 per cent on the prices set in 2007.
This reduction was less than internet retailers were hoping for and Slingshot and CallPlus chief executive Mark Callander warned it could lead to higher prices for consumers.
Because the "vast majority" of the lines Slingshot rent are in urban areas, the company will be effectively paying an extra $4 a line on what it pays today, he said.
"It's a transfer of wealth from us to Chorus, essentially. So we're going to have to assess what we're going to do with [the cost increase]," Callander said.
Kordia New Zealand chief executive Scott Bartlett said the regulator missed the chance to lower the cost of unbundling - a practice where internet retailers put their own equipment in telephone exchanges to provide different services to customers.
The decisions
Final ruling
*The Commerce Commission made a small cut to the amount internet companies pay Chorus to rent its local lines each month.
*This cut was less than the commission indicated in March and less than internet retailers were hoping for.
*Chorus said the decision will knock $20 million a year off its operating revenue.
New proposal
*The commission proposed to cut unbundled bitstream access pricing by 27 per cent, from December 2014.
*This service enables internet retailers to supply broadband services without the need to replicate Chorus' local copper lines or have their own equipment in telephone exchanges.
*Chorus said cut could reduce its operating revenue by $150-$160 million a year.
*A final decision on UBA pricing is not due out until next June.
