Ann: GENERAL: CNU: Chorus asks for FPP to be grounded in New Zealand reality

• Release Date: 07/08/14 08:40
• Summary: GENERAL: CNU: Chorus asks for FPP to be grounded in New Zealand reality
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					CNU
07/08/2014 08:40
GENERAL

REL: 0840 HRS Chorus Limited (NS)

GENERAL: CNU: Chorus asks for FPP to be grounded in New Zealand reality

STOCK EXCHANGE ANNOUNCEMENT

7 August 2014

Chorus asks for FPP to be grounded in New Zealand reality

Chorus has today said that the Final Pricing Principle (FPP) processes
provide the opportunity to ensure the regulated price for broadband services
is grounded in the reality of New Zealand's circumstances.

Under the Telecommunications Act, the aim of the FPP is to deliver regulated
prices that reflect the costs to efficiently deliver regulated broadband
services here in New Zealand, as well as encouraging future investment.

Chorus has submitted in response to the Commerce Commission's request for
feedback from industry participants on its initial view of how it plans to
undertake the modelling required to deliver the FPP.

In modelling the network the Commerce Commission is seeking to calculate the
cost to someone of entering the market today and building a new efficient
network, while taking on 100% of the demand.  The Commission takes a range of
inputs into its calculations but will also make some of its own choices as to
how a hypothetical network would be built.

"While we acknowledge that the Commerce Commission has some flexibility when
choosing how to model the hypothetical network, we think it is important that
the choices they make accurately reflect the realities of building and
operating a network in New Zealand.  This is consistent with modelling
undertaken by regulators around the world," said Mark Ratcliffe, Chorus CEO.

"For example, the hypothetical network should not overestimate the amount of
the network that could realistically be built overhead, given council
by-laws, the Resource Management Act and other constraints.

"Also, if the hypothetical network is going to be modelled using a technology
other than copper, any modelling should cost-in the functionality that
ensures the same services that end-users expect today, including burglar
alarms, SkyTV services and medical alarms, can be delivered.

 "Chorus is a structurally separated wholesale only infrastructure provider,
with around 80% of its revenues coming from regulated services and a
significant upgrade investment underway until 2020.  In this context, there
is little room for Chorus to recover its costs elsewhere and continue to
invest if the FPP does not deliver a balanced outcome.

"To ensure that the timetable stays on track, we are also encouraging the
Commission to engage the industry on other issues, such as installation fees,
prior to the draft determination."

Chorus has also made a submission about a predictable backdating policy and
will explore commercial repayment options with its customers to inform the
Commission's process.

To ensure the Commission has all the data it needs to make accurate modelling
decisions, and to give all industry participants a transparent view of costs
in New Zealand, Chorus will be releasing its own modelling data on its costs
later this year.

"FPP outcomes are expected to deliver a higher aggregate copper broadband
monthly price than the benchmarked price of $34.44.  Within that aggregate
price we also expect the local loop services to increase in price.  A
sustainable FPP outcome will give certainty to all industry participants
through to 2020, when a new regulatory regime is expected to come into
effect," he said.

Chorus' submission is available at www.chorus.co.nz/investor-presentations

ENDS

For further information:

Ian Bonnar
Corporate Affairs Manager
Mobile: +64 (27) 215 7564
Email: [email protected]

Brett Jackson
Investor Relations Manager
Phone: +64 4 498 9271
Mobile: +64 (27) 488 7808
Email: [email protected]
End CA:00253573 For:CNU    Type:GENERAL    Time:2014-08-07 08:40:38