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Further update on postponed UFB price changes

On 27 March we announced our decision to postpone the proposed UFB price increase by reference to CPI until 1 October 2020 at the earliest. At the time, we told you we were considering the associated implications for any proposed CPI adjustment to the price caps under the NIPAs agreed between us and Crown Infrastructure Partners. 

The outcome of our review is that we will not be increasing UFB prices until at least 1 October 2020 but we will proceed with a CPI increase to the UFB price caps with effect from 1 July 2020 to allow for possible increases to the UFB price at a later date. 

We’ve calculated the new price caps and provided this detail to Crown Infrastructure Partners (CIP) for verification our calculations are correct.  Once verified, CIP will publish the new price caps on its website.

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.  It is very challenging to quantify the extent of the impact at present as – in part – it will depend on how long we remain in Alert Level 4 and, once we reduce to lower levels, at Alert Levels 3 and 2. Due to this we have indicated the earliest a price change will be implemented is from 1 October 2020. 

However, given the context, we have yet to decide whether to go ahead with any price increase by reference to CPI from that date.  We retain the flexibility to do so by increasing the price cap.  We’ll only make use of that flexibility if we consider it is appropriate considering the wider market impacts from Covid-19 and other Covid-19 related support we have provided to the industry.  We can’t make that assessment until closer to the 1 October 2020.

It is important to note that even though this price cap increase will apply from 1 July, the price you pay for our fibre services will not increase from that date.  We’ll need to apply the agreed price change process if we do decide to implement any change to the price you pay for UFB services from 1 October 2020 or a later date.

[Note: Our layer 1 unbundled fibre service, PONFAS, is priced on a commercial basis and is not subject to price caps agreed with CIP.  This price cap adjustment process has no impact on our current PONFAS pricing.]

Next steps

Confirmation of change to price caps

CIP wrote to the industry earlier this year and confirmed the process for price cap changes by reference to CPI.  We’ll follow this process and let you know as soon as possible once we receive confirmation from CIP of the new price caps.  The timetable provided by CIP indicates we can expect this confirmation by 4 May.  [Note: This timetable was issued by CIP quite some time prior to the alert level 4 lockdown taking effect.]

Confirmation of approach to CPI price change post-1 October 2020

We’ll decide what approach to take on this closer to 1 October 2020. Once we’ve made that decision, we’ll update you further.

Contact

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