Image: Chorus
The New Zealand Commerce Commission (ComCom) has released a draft decision [PDF] on the value of Chorus’ fibre network for regulatory purposes, pricing the network at NZ$5.4 billion.
Under the Telecommunications Act, ComCom is required to establish the value of Chorus’ fibre network, which includes the assets Chorus uses to provide fibre broadband services, as well as a financial loss asset (FLA) to compensate Chorus for losses it incurred when rolling out the network ahead of demand.
The official valuation, which must be officially set by the start of 2022, determines the maximum revenue a regulated provider like Chorus can earn from its fibre network. Due to this, the valuation of the network is a “key building block” for determining how much revenues Chorus will be able to earn until 2025, ComCom said.
The fibre network was built by Chorus in partnership with government-owned Crown Infrastructure Partners under the Ultra-Fast Broadband program.
The NZ$5.4 billion figure, which values Chorus’ core fibre assets at NZ$3.98 billion and its FLA at NZ$1.5 billion, is around NZ$160 million lower than the regulatory asset base (RAB) valuation submitted by Chorus in March.
The draft decision took into consideration consultation from external experts and other stakeholders regarding the initial valuation made by Chorus, ComCom said.
The dip in valuation was largely due to ComCom not sharing Chorus’ view on certain cost allocations, with the regulator saying non-fixed fibre lines access services should be allocated to the telco’s copper network instead.
“While we mostly agreed with Chorus’ proposed asset valuations, we considered that some infrastructure and overhead costs that have been allocated to its fibre network should more appropriately be allocated to its copper network and other parts of its business,” Telecommunications commissioner Tristan Gilbertson said.
“These types of costs should not be passed on to fibre consumers.”
This reduction was partially offset by changes made to improve the approach to calculating Chorus’ FLA, however, which adds back around NZ$80 million in value, ComCom explained.
Following the draft decision’s release, ComCom is now seeking feedback from Chorus and other stakeholders.
Chorus CEO JB Rousselot said Chorus would analyse the draft decision and make submissions based on extensive modelling work.
“We welcome this step towards greater certainty for Chorus and our investors. Our aim is to ensure the final RAB reflects the full costs of structural separation required by the public-private partnership with the Government. We’ve used a lot of our existing infrastructure and spent billions more to rollout the fibre network over the last decade,” Rousselot said.
“It’s critical that the true value of our participation in this partnership is recognised so we can keep investing in developing the capability and reliability of fibre broadband for New Zealand.”
ComCom is expected to give another network valuation in December, with the regulator set to give the final valuation for Chorus’ fibre network next year when “when all necessary information is available.”
As of April, Chorus has 143,000 users on 1Gbps connections, after uptake grew by 7,000 connections during the three months to the end of March. The broadband wholesaler also said that the quarter saw it add another 29,000 customers into its fibre network, with the average monthly data use of fibre rising from 460GB to 491GB.
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Source: Networking - zdnet.com
