On 19 June we announced proposed UFB pricing changes by reference to CPI to take effect from 1 October 2020. Consultation on those proposed changes closed on Thursday 2 July. We’ve now had an opportunity to consider the feedback we received, and the decision has been made to proceed with the proposed price changes.
Important note: This Customer Update serves as formal notice of these price changes under the Reference Offer.
Consultation on the proposed price changes closed on Thursday 2 July.
We’ve identified the two key themes arising from the feedback we received below:
- Uncertainty of COVID-19 impact merits delay: Preferable to delay any price increase until likely financial impact of COVID-19 restrictions can be better quantified (i.e. once the wage subsidies and mortgage holidays are withdrawn later this year).
- Variance in delay preference: Variance in view on appropriate length of delay from no indication of what alternative date was preferred, delay until 1 July 2021 or delay until 1 January 2022 to align with commencement of the new BBM regime.
Thanks to those service providers who provided feedback to us about these proposed pricing changes.
After considering all feedback received, we consider that - on balance - the proposed CPI pricing changes are appropriate. So, we have decided to proceed with the proposed price changes as summarised in our earlier Customer Update. This increase will apply to all UFB services other than those we’d previously indicated would be out of scope, namely:
- Fibre Max (Gig) – Consumer Max 500 2.5-2.5 and SME Max 500 2.5-2.5;
- Small Business Fibre; and
- Tail Extension Service (TES).
In addition, we’ve decided there are a few other services that should not be subject to this price change as follows:
- Enhanced Bitstream 4 – a 2.5% CPI increase will be applied to the 100Mbps access price only (i.e. no increase to 1G access price or bandwidth prices) [Note: There is a consultation underway currently on a proposed bandwidth price reduction for Enhanced Bitstream 4.]; and
- HSNS – a 2.5% CPI increase will be applied to the 100Mbps and 1G access prices only (i.e. no increase to bandwidth prices).
You can check out a full list of the fibre services to which these price changes will be applied here.
It is important to note there will be no backdating of these price increases to 1 July 2020.
What are the details?
As we earlier signalled, we’ve considered 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.
Wider market impacts from COVID-19
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 and that there may be a lag in the effect of some of those impacts. We don’t yet know the extent or timing of these impacts, with analysts promoting various forecast scenarios. It is hard to quantify what these impacts might look like at this stage.
What we do know is we need to continue to invest in our network for the future rather than focussing on only building capacity for today. This approach is what helped ensure our network performed to an exceptionally high standard during the lockdown.
COVID-19 related support
We’ve provided robust support to industry in response to COVID-19, most notably:
- Postponement of this proposed CPI increase by three months;
- Up to 50,000 connections made free for six months to support students in homes without broadband to learn from home;
- Almost $5m in support payments made to service companies to top up the Government’s wage subsidy and to enable them to retain staff;
- Several changes to reduce costs for businesses, such as the removal of disconnection and reconnection fees;
- Reduction of Fibre Max prices; Consumer Max from $60 to $56 per month, and SME Max from $70 to $66 per month, in each case from 1 July 2020
- Reduction of Small Business Fibre 100 prices by $3 to $52 per month from 1 July 2020.
- Introduction of the $2m COVID-19 Relief Fund.
We expect these initiatives to provide savings of almost $12m to service providers.
In addition to these support measures, we considered postponing the proposed price increase beyond 1 October 2020. We did not consider this was the best approach for consumers and businesses who rely on our network. Rather, we decided this approach was broad brush and risked not helping those consumers and businesses most in need of support.
When considered with our COVID-19 support to date, we believe the proposed CPI pricing changes are appropriate given what we know today. We feel our overall approach strikes the right balance when acknowledging our COVID-19 relief package and savings to service providers on a number of key products (i.e. by way of the price reductions to Fibre Max and Small Business Fibre, amongst other initiatives), while still enabling ongoing investment in our network.
Go-live from 1 October 2020
The proposed CPI price changes will be implemented from 1 October 2020. Service providers will receive their first invoices reflecting the CPI price changes in the 27 September billing cycle.
For any queries please contact your Account Lead or Service Delivery Manager at first instance.