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With fibre providers occupying what it calls a “near monopoly position”, the Commerce Commission is seeking feedback on a draft decision against the deregulation of ultra fast broadband services.
“Our preliminary view, just three years into the new regime, is that there’s not enough competitive constraint on fibre for there to be any serious question of deregulation at this time,” telecommunications commissioner Tristan Gilbertson said today.
“Fibre providers occupy a near monopoly position in their markets, with the incentive and ability to act contrary to consumer interests, unless there’s enough competition from alternative technologies to hold them back.”
New Zealand’s fibre networks were built by four regulated fibre wholesalers — Chorus, Enable, Northpower, and Tuatahi — in partnership with the government under its ultra-fast broadband (UFB) initiative.
These networks are now regulated through a price-quality and information disclosure regime, introduced in 2022 following amendments to the Telecommunications Act.
Gilbertson said 4G wireless broadband did not exert sufficient competitive constraint on the market power of fibre providers.
“4G wireless broadband is limited in its ability to constrain fibre – particularly given the increasing gap between what Kiwi consumers want from their broadband service and what 4G wireless broadband can deliverm” he said.
The Commission is concerned that, if regulation were removed prematurely, fibre providers would be able to increase prices or reduce quality – or both – to maximise profits at the expense of consumers.
“It’s therefore in the best interests of consumers that current regulation remains in place for now – so that Chorus continues to invest in providing world class services at reasonable prices,” Gilbertson said.
“Regulation is designed to promote the long-term interest of consumers and outcomes consistent with an effectively competitive market – as seen in our final decision last week on Chorus’ expenditure for the next four years.”
This will see Chorus invest $1.7 billion in its network over the period but protect consumers from $172.6 million of “unjustified” expenditure that would have flowed through to higher prices.
If confirmed, regulation would continue to apply to wholesale UFB fibre services, with deregulation to next be considered before 2029.
“We’ll be keeping a close eye on the development of 5G wireless broadband services going forward,” Gilbertson said.
“They narrow the gap between what most consumers want in terms of speed and performance and what wireless broadband can deliver – so they’re a potential game changer.”
However, he said, their potential hadn’t yet been demonstrated.
Submissions on the commission’s draft decision are due by 5pm on 24 September 2024.