We’ve made some further changes to our cancellation charging policy related to bitstream products, to address your most recent feedback. We’re making sure the calculation of the monthly cancellation rate more accurately reflects your ability to convert orders into connections, with some knock-on changes to the level of the cancellation thresholds.

What’s happening?

We announced the final cancellation charging policy on 17 December 2019. Although formal consultation on this policy had closed at that time, some of you gave us further feedback on our most recent amendments to that policy.

The key concern raised was the way in which we calculated the monthly cancellation rate. Previously, we calculated this rate by combining two percentages; one a monthly cancellation rate related to within month cancellations and one a monthly cancellation rate related to WIP cancellations. We use the monthly cancellation rate to determine whether the cancellation threshold has been met, with cancellation charges payable where this has not been met.

Some of you suggested this did not accurately reflect your ability to convert orders to connections and was not correct from a mathematical perspective (i.e. because it involved adding fractions with different denominators).

To date, we’ve been comfortable with this means of calculation on the basis the monthly cancellation rate was designed to be an index only and aligned with other reporting. Having said that, we recognise the divergence in cancellation rate calculation in this context may prove challenging for RSPs to manage internally.

A small number of you continued to be concerned about evidence of appropriate categorisation of ‘Qualifying Cancellations’ and issues relating to any potential pass-through of cancellation charges to consumers. We’ve addressed these concerns in our previous Customer Updates and directly with the relevant RSPs.

What are the details

You can check out the final cancellation charging policy and a detailed explanation of the methodology we’ll use to calculate cancellation charges and how we’ll report to you on these cancellation charges.

In summary, we’ve made the following changes to the way we calculate the monthly cancellation rate and adjusted the cancellation threshold levels accordingly as set out below:

Monthly cancellation rate

We’ve changed the way we calculate the monthly cancellation rate as follows:

Note: All calculated percentages are rounded to two decimal places.

Cancellation threshold

We’ve also updated the cancellation thresholds as follows and provided an explanation of the rationale behind these changes.

 

Date	Updated cancellation threshold
From 1 March 2020	10%
From 1 July 2020	9%
From 1 November 2020	8%
From 1 March 2021	7%

Evidence and pass-through

As we’ve said previously, the charging relief threshold under the policy is designed to encourage you to focus on tackling overall cancellation rate reductions rather than on charging to consumers. As a result, we haven’t amended the policy further to address the remaining pass-through concerns noted in your feedback. We don’t plan to provide evidence to justify this charge.

We are hopeful our amendments will remove any final residual concerns you have about the policy and associated methodology.

Next steps

A session to explain the changes

We’ll be hosting a teleconference from 10.30-11.30am on Monday 17 February to explain the rationale behind these latest changes, focusing in particular on the updated cancellation thresholds. All Service Providers are welcome to attend this teleconference. If you want to attend, contact Neeraj Agarwal (neeraj.agarwal@chorus.co.nz) directly for teleconference dial-in details and to register your attendance. Since the topic relates to charges, we won’t be taking feedback on the changes during the teleconference. If you do have feedback following our explanation, please provide it directly to us as below.

Your feedback on these changes

Although formal consultation on the policy has closed, we’d like to give you an opportunity to provide further feedback on these latest changes. You can provide your feedback on these changes to us up until 5pm on Wednesday 19 February. Please contact your Account Lead or Service Delivery Manager with further feedback at first instance.

Update to cancellation charging reports based on updated methodology

Your Account Lead or Service Delivery Manager will be in touch shortly with revised cancellation charging reports for November and December 2019. These revised reports will be based on the updated calculation methodology.

Cancellation charging from 1 March 2020

We’ll start to charge for cancellations under the final cancellation charging policy from 1 March 2020. The first invoice for cancellation charges (if any) will show up in your April invoice.

Contact

For any queries please contact your Account Lead or Service Delivery Manager at first instance.