Wholesale fibre price rises will place undue pressure on customers

Vodafone NZ responds to Chorus increasing their wholesale fibre price during a global pandemic

In response to the announcement from Chorus yesterday, Vodafone NZ says:

“We are hugely disappointed Chorus will proceed with raising wholesale fibre prices in October. This tone-deaf move does nothing to help hard working New Zealanders, who may need to pay more for their internet when connectivity matters more than ever.

“The wholesale input cost of fibre is already well over half of the price of Vodafone’s most popular fibre broadband plan and we now have to review whether we can absorb this additional Chorus cost.”

Determining what this means for consumers and their broadband bills

“While we don’t believe increasing retail prices during a global pandemic is fair on consumers, the reality is with declining margins and in such a brutally competitive broadband market, we may be forced to do so.

“In other sectors such as petrol and aviation, retailers routinely pass on third party cost increases, while in the telco sector New Zealand consumers have benefited from lower prices when retailers absorb these cost rises. We want to help struggling families and businesses keep internet access at the top of their shopping lists, but Chorus is making it harder for us to do so.”

Lining shareholder pockets during a global pandemic

“Chorus fibre price rises are great for Chorus shareholders, who have enjoyed strong returns over the last year, but place added cost pressure on retailers and consumers at a time when New Zealand faces a recession, and GDP growth is the worst it’s been in 27 years and predicted to decrease further.

“As we noted in our submission to Chorus when they were deciding whether to increase prices in October, while increases are allowed for under the Telecommunications Act 2001 they are voluntary. Delaying the price changes will simply increase the size of the losses asset that will form part of the regulatory asset base (RAB) under the Part 6 regime. There is no need to recover these costs now, when New Zealanders are hurting so much, when it can be recovered during more stable economic times.

“Chorus is entirely free to decide whether to delay these price changes – it’s chosen higher prices now over doing what’s right for its customers and the end-users of telecommunications services.”

We’ve been asking Chorus to help share retailer’s pain, not just take the profit

“Since March, we’ve been asking Chorus and other local fibre companies to share the pain of the growing financial impacts of Covid-19, which are only set to worsen as Government support such as the wage subsidy ends and more businesses and households are placed under economic strain. We are also disappointed these calls for help appear to have largely fallen on deaf ears, with their limited commitments to date ending before the bulk of the financial impact is set to hit Kiwis.

“To help offset the impacts of these CPI price rises, we ask Chorus to share in the commercial impacts of Covid-19 and help us respond to the growing numbers of customers looking for financial hardship relief. We’ve seen customer requests to delay or reduce internet bills grow much faster in alert level 1, and expert reports expect these numbers will continue to grow.

“The high-speed internet network was largely funded by the New Zealand Government, and indirectly by New Zealand tax-payers, meaning Chorus’ shareholders are profiting without sharing in the burdens of delivery placed on retailers who are trying to maintain online connectivity for as many Kiwis as possible during the response and recovery from Covid-19.”

Fixing faults quickly to help consumers

“Kiwi consumers would also benefit if Chorus focuses more on improving their service quality on fault-fixing, especially if they’re intending to charge more for it. Retailers and their customers often bear the brunt of poor maintenance and response times, when we’re often at the mercy of Chorus to determine when they will fix faults on their networks.”

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