On 27 March, we  announced the postponement of proposed UFB price increases by reference to CPI until 1 October 2020 at the earliest. We made this decision in the context of the spread of the Covid-19 virus and its anticipated economic impact on countries around the world, including New Zealand.

Since then our industry has been part of New Zealand’s successful move through the alert levels 4, 3 and 2 to alert level 1. The Reserve Bank has indicated the New Zealand economy is expected to be operating at only 3.8% below pre-Covid levels at alert level 1.

We believe it is the right time to re-open consultation as to whether a 2.5% UFB price increase should be implemented from 1 October 2020.  We’re asking for your feedback to CPIfeedback@chorus.co.nz by 5pm on Thursday 2 July.

 

What’s happening?

On 5 May 2020, Crown Infrastructure Partners (CIP) confirmed a CPI adjustment of 2.5% to all UFB price caps from 1 July 2020.  This price cap increase allows for possible increases to UFB prices and we’ve said the earliest we’d make these wholesale contractual price changes would be from 1 October 2020.

We know there will be a significant economic impact for New Zealand as a result of the of the spread of Covid-19 and associated restrictions. We indicated earlier that we’d consider the wider market impacts from Covid-19 and other Covid-19 related support we have provided to the industry in deciding whether to go ahead with the proposed UFB price increases.

Rationale for the proposed increase

Covid-19 has proven that in modern society reliable, high quality broadband is no longer an optional, discretionary service, but rather an essential service.  In the context of a 40% increase in demand in less than a week, our network performed to an exceptionally high standard without missing a beat.

A key factor in this impressive response is our significant and ongoing infrastructure investment. Continued network investment by us is good for New Zealand consumers and businesses, especially as they are increasingly reliant on the connectivity our network provides.  This proposed increase will help us to continue to invest in our network with confidence.

COVID-19 industry support

We’ve implemented some key support measures to help industry manage Covid-19 impacts, including the postponement of the CPI price change, Ministry of Education support package and suspension of business reconnection fees. 

We’ve kept our promise to reduce the price of our Fibre Max (Gig) plans from 1 July 2020.  More recently, we‘ve asked for your feedback on a proposal which would see the price of Small Business Fibre reduced by $3 per month. Feedback from you on that proposal has been positive so we’re hopeful we’ll have more good news for the industry next week.

[Note: More details about our existing industry support can be found here.]

But we want to do more. We considered postponing the proposed price increase beyond 1 October 2020 but decided this approach was broad brush and risked not helping those consumers and businesses most in need of support.  Rather, we want to offer additional support targeted at those suffering financial hardship as a result of Covid-19 which impacted their ability to pay their retail broadband bills during lockdown.

Today we have announced consultation on a $2 million Lockdown Relief Fund aimed at achieving this objective. We are keen for your views on the proposal, so we’d encourage you to read more about it here and provide us with feedback.

Why further consultation?

We’d already started the contractual process required to implement a CPI adjustment to UFB prices before the Government mandated an alert level 4 lockdown of the country on Wednesday 25 March. Consultation under that process had closed on Friday 20 March and we’d received no feedback from service providers. 

The world has change dramatically as a result of Covid-19.  As a result, we weren’t comfortable relying on your feedback from the earlier consultation round – of which there was none.  We want to re-open consultation to give you a further opportunity to consider the proposed increase.

Consultation process

Our proposal remains the same as set out in our customer update on 27 March 2020, with two exceptions:

• we now know the CPI – all groups index for the March quarter 2020 is 2.5%, which will be the percentage increase applied; and
• the implementation date will be 1 October 2020 rather than 1 July 2020.

You can check out a full list of the fibre services to which the 2.5% price increase will be applied (ref. resources section below).

Important note: this proposed CPI price increase remains subject to internal approvals.

We have summarised the key steps in this consultation below.

Feature	Commentary
Further consultation period	A further consultation period opens on Friday 19 June and runs for 2 weeks until Thursday 2 July. Feedback should be provided to CPIfeedback@chorus.co.nz
Chorus considers feedback	We’ll review feedback and collate it into themes across the industry.
High-level summary of consultation feedback	We’ll update you by Thursday 9 July letting you know whether: we have decided to go ahead with the proposed price change; and there are any amendments to the proposal we’ve consulted on as a result of feedback. We’ll include a high-level summary of consultation feedback as part of that customer update.   Our default position is that we won’t identify the service providers who gave feedback nor what feedback belongs to which service provider. We’re open to making a connection between you and your feedback as part of the summary, if you tell us you want us to do so.

 

Next steps

 

Further consultation

We’d like your feedback on the proposed price changes by 5pm on Thursday 2 July. Please send your feedback directly to CPIFeedback@chorus.co.nz. 

You’ll need to let us know whether you want your feedback to remain anonymous or not (i.e. do you want us to publicly make a connection between you and your feedback as part of the high-level feedback summary we intend to provide to the industry once consultation closes).

Contact

For any queries, please contact Hannah Croft at first instance.