Commission decision challenges access competition

Media Release
18 June 2009

Commission decision challenges access competition

Today’s Commerce Commission decision on sub-loop costs will make it unviable for competitors to unbundle all but a few Telecom cabinets.

The decision has set backhaul costs at ten times the costs outlined in the draft determination and co-location costs are 50% more than the draft determination.

According to Vodafone’s General Manager Corporate Affairs, Tom Chignell, the decision will make it almost impossible to make a business case to unbundle all but a few cabinets.

“No one is going to provide competition if it means losing money hand over fist, after paying Telecom. This is before any of our own costs such as backhaul, cabinet equipment and marketing and support costs are considered.

“An access seeker with a 10% market share of an average cabinet would pay Telecom $184 per customer per month, excluding set up costs.
“Taking an average revenue of $90 per customer per month, the lack of viability becomes clear,” says Chignell.

% Market share (average cabinet) / Monthly amount payable to Telecom (excludes set up costs)
10% / $184
20% / $98

In contrast, an access seeker at an average exchange would pay Telecom around $22 per customer per month, which is almost unchanging across a range of market shares.

The decision also cripples the wholesale market. For Vodafone to compete in the wholesale bitstream market, it would need to pay up to $184 per month to onsell a service to compete with Telecom Wholesale’s service which costs $47 per month.

ENDS

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