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Claims over Chorus pricing proposal 'nonsense'

Published: 6:45AM Friday September 13, 2013 Source: ONE News

Prime Minister John Key says New Zealanders will not be paying more for broadband under any scheme the Government is considering.

The Coalition for Internet Pricing is furious the Government plans to override a Commerce Commission ruling that copper network operator Chorus slashes its broadband charges by 25%.

Instead of the recommended $12 the Government is considering a cut of up to $7.50.

The Coalition said proposals released in a discussion paper last month mean broadband operator Chorus will gain $600 million over the next six years and people using copper wire technology will face paying $150 a year more than they would have under the commission's recommendations.

Sue Chetwin from Consumer New Zealand says it is "a tax on every Kiwi to subsidise Chorus - a profitable monopoly".

Mr Key told TV ONE's Breakfast this morning the idea that consumers are going to be paying more under different schemes proposed by the Goverment is not true.

"Everyone will pay less under every scenario, it's just a matter of how much less.

"And secondly the concept that somehow Chorus is having it's shareholders you know enriched by all of this is nonsense."

He said the Commerce Commission has taken a "very narrow interpretation" of the law in making their pricing recommendation.

The Prime Minister said the commission had said they believed they were legally required to use their interpretation "even though they are very doubtful about it, so they came up with this recommendation for a very large cut".

He says the Government is not comfortable with the recommendation.

"The Government's view is that they're interpreting the law incorrectly, and they're going away to have a look at that."

Chorus owns the old copper phone network which most Kiwis use to access the internet.

Mr Key said the commission is saying that because copper has been in the ground for a very long time it has lost its value, and therefore consumers should pay nothing for it.

However, Chorus is currently not making any money out of UFB, and he says while the private company rolls out the fibre for UFB its "income stream comes from that existing copper asset".

"Basically if the Commerce Commision ruling stands there's a chance Chorus will go broke, in which case the Ultra Fast Broadband (UFB) won't be rolled out," he said.

Today is the last day for public submissions on broadband pricing.

'Copper tax'

The coalition launched its "Axe the copper tax" campaign yesterday, aimed at stopping ministers from taking over broadband price setting and changing Commerce Commission recommendations.

Ms Chetwin said it was unfair on the roughly one million Kiwis who will never have access to it, but will pay the "tax" anyway.

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Ms Chetwin told Breakfast that Chorus knew this type of pricing was going to come in for copper three years ago, so it is "astounding now that this move has happened".

"It is only a discussion document at the moment but the discussion document doesn't actually allow for any of the commerce commission's findings to actually be part of it so you know we think it's nearly a done deal and we think its wrong."

She said they want to see UFB rolled out, but that Chorus has to stick to its $900 million contract to build the bulk of the new fibre network that it negotiated with the Government, as the other 30% of other companies involved in the project will be doing.

Ms Chetwin says the move follows lobbying by Chorus.

As part of the agreement to split Telecom from Chorus, a condition of its winning the ultrafast broadband (UFB) contract, there was a commitment to review the price it could charge broadband users to connect to the old copper-based network.

Chorus claims the Commerce Commission decision would cost it $160 million in lost revenue, and rubbished suggestions it is a new tax saying the $600 million figure is based on a proposed cut that has not been finalised yet.

Communications Minister Amy Adams says she's still consulting on the proposals and no decisions have been made.

Opposition parties are backing the campaign, with Labour's finance spokesman David Parker saying the "copper tax" will mean bigger bills, and the Greens saying it's wrong for the Government to interfere by setting a price that benefits Chorus and no one else.