CNU - Chorus

[JAYAY]

My thoughts exactly. If the nuclear option is genuinely an option (and if it's not there are some clued up people who have been talking a load of bullocks) it's definitely where I would be focusing my discussions with the Govt & seriously considering rolling it out. IMO with sufficient thought & PR spin it could even come out as a relatively understandable & palatable outcome for the public ... although the usual Labour/Greens brigade will be railing away as they do about anybody in business or right-ish politics doing anything.

My thoughts exactly as well. EY may well have thought of it but weren't obliged to mention it, but how come Hooton and his mob didn't think of it.
As you say the PR spin would be easy given that it has emerged that main beneficiaries of the Comcom decision has been Vodaphone etc rather than the consumers.

[USbasedInvestor]

I saw some discussion that the telecom companies might not pass the reduced pricing along to consumers. Is that now a fact, or just a point of discussion? It seems to me that lower pricing that does not get passed along also is not consistent with the pricing decision. Why mandate a reduction, if it does not reach consumers - unless the intent is just to distribute profits to a different corporation?

My understanding as to the politics is that the minority parties oppose govt overriding the pricing decision as they do not want to be seen keeping consumer prices high. I think it would be hard to spin a nuclear option as a positive. Consumer: so now to get the same performance we have to pay more?

There are a couple other topics I have not touched upon. First, after this govt fiasco, I decided to sell my Telecom New Zealand, and will certainly have some hesitation should I consider investing in New Zealand stocks (it is a big world, plenty of other places to look). Second, I have experienced fiber in the US, living in one of the first communities to get fiber to the house. This second point has lots of areas to discuss - the uptake, the deployment, consumer behavior, corporate pricing behavior, bundling services, customer support on older/lower speeds, etc. If folks are interested I can share what I observed.

[Harvey Specter]

Retailers dont have to pass on the price reduction. And the fact that it could be recouped means most probably want. However, as their is competition in retail (where there isn't in network), the free market will decide if the price is passed on - a few of the small have said they will which may see them grow market share.

Politically it is difficult as you point out and we are in an election year which is going to be close. Unfortunately, politicians who live in 3 year windows, are unable to look at the big picture.

How has your internet use changed since you got fibre. What speed were you getting before compared to now. One issue in NZ is that we cant (legally) get services like netfix etc. iTunesNZ has a very limited catalog (no TV programs) so I, in breach of the contract, have a US iTunes account (you can do a similar breach with netflix buy you also have to get around the Geoblock, which isn't that hard).

[USbasedInvestor]

How has your internet use changed since you got fibre. What speed were you getting before compared to now.

I think my internet usage has changed very little since getting fibre. That said, we only watch the occasional movie streamed via Netflix or Amazon.

People generally had a few choices: 1) dial up 2) DSL 3) Cable and then 4) fiber

I long had DSL service, and cannot tell you what the speed was, though generally believed to be less than cable. The initial fiber internet speed I got was 5mbps/2mbps (one is upload, one is download). Not too long ago, they had a promotion and I upgraded to 50mbps/25mbps. In day to day use I cannot tell any difference! If I download a large file - such as a software update - it is very noticeable, but for daily internet use it made no difference.

I generally use a desktop, hardwired to my router. However we also use iPads and iPhones and wireless notebook computers. The speed of those depends upon your wi-fi standard, and are usually well less than the theoretical maximum. I would look at the speeds you realize using wireless today and where you see bottlenecks. Can you stream video? We have as many streaming glitches at high speeds as we did at low speeds.

My fiber experience is more about the provider. Verizon was going to do a huge, fast rollout of fiber to the home. Then they discovered it was extremely costly, and while they got decent uptake, not everybody went all in for fiber. So the rollout got delayed because Verizon simply could not fund it. If folks were happy with their cable service, they generally did not switch. I regretted switching within days for tv, though the interest was improved. Verizon was selling bundled phone, internet and tv/cable. At first they had reasonable prices (and horrible tv menus, etc, but they fixed all that in time). Increasingly people have dropped home phone lines, just relying on cellphones or using a voip service (mine costs $3 per month for phone service). As this trend accelerated, Verizon began raising prices. In fact, you can drop your phone service now, and not save much money at all because they pretty much throw in phone to complete the bundle. The less you take, the higher the price for each individual service. $30 per month internet service (from memory) became $35 became $45, became $55. In not too many years.

They aggressively push you to higher services/faster speeds/etc. I have an early package they no longer offer. As a result, they will not fix things for me unless I switch to a higher priced package that they currently offer. I experienced a problem, due to the router being out-of-date. Since I would not update, they would only send me the exact same router. We had a fun game of them sending me a new out-of-date router every other day, and me returning it. All on their nickel, took just a few minutes of my time. After this went on several times, they sent me an updated router, which everyone on the higher data plans uses.

There are still a good number of folks using cable that have access to fiber. There are still a good number using DSL. Gamers require high speeds, but my 5/2 was more than adequate.

My experience then, is that the cost of fiber deployment is so high that the provider has to have significantly higher prices than were experienced in the market before. This creates an umbrella for legacy service prices to be raised. Which then results in more folks dropping their landline, etc. In the states we are experiencing folks dropping cable for the first time every (in total). It does not help that Verizon makes me click off an ad before I can watch tv - they are hungry for revenues anyway they can get it.

[klid]

My thoughts exactly. If the nuclear option is genuinely an option (and if it's not there are some clued up people who have been talking a load of bullocks) it's definitely where I would be focusing my discussions with the Govt & seriously considering rolling it out. IMO with sufficient thought & PR spin it could even come out as a relatively understandable & palatable outcome for the public ... although the usual Labour/Greens brigade will be railing away as they do about anybody in business or right-ish politics doing anything.

Looks like a silver bullet choice.

I can't find the material now but I think from the get go Chorus (Ratcliffe?) indicated they pretty much just weren't going to go down that path. I think they want to achieve things in a different way, they must have confidence in what is and will transpire.

Regarding fibre/fibre uptake... by the time it's readily available around these parts (residential) I think it will become a necessity, with the performance of current DSL even if you wack an A or a V before it (ADSL/VDSL), will be thought of as dial-up is compared to DSL now.

[Bjauck]

I saw some discussion that the telecom companies might not pass the reduced pricing along to consumers. Is that now a fact, or just a point of discussion? It seems to me that lower pricing that does not get passed along also is not consistent with the pricing decision. Why mandate a reduction, if it does not reach consumers - unless the intent is just to distribute profits to a different corporation?

My understanding as to the politics is that the minority parties oppose govt overriding the pricing decision as they do not want to be seen keeping consumer prices high. I think it would be hard to spin a nuclear option as a positive. Consumer: so now to get the same performance we have to pay more?

The way I see it is that the ComCom mandated a price reduction (for which Chorus has requested a full review) for the contract of supply from Chorus. This contract includes the "nuclear option". Chorus would be fully within in its rights and contractual obligations to reduce the bandwidth supplied down to the minimums it is contractually obliged to supply. In my opinion the ComCom itself has already released the nuclear option and Chorus' self-preservation defence of reducing speeds would be contractually sanctioned. If the TelCos wanted more bandwidth they would have to enter into a new contract at possibly the old prices as opposed to the reduced price - in other words the consumer would be paying the same price as they are paying at the moment.

If return on capital is unreasonable then NZ will never get anyone willing to invest in infrastructure unless it is guaranteed or financed by the taxpayer. Of course, I imagine the Greens would be in favour of that and a large state involvement.

[USbasedInvestor]

The way I see it is that the ComCom mandated a price reduction (for which Chorus has requested a full review) for the contract of supply from Chorus. This contract includes the "nuclear option". Chorus would be fully within in its rights and contractual obligations to reduce the bandwidth supplied down to the minimums it is contractually obliged to supply. In my opinion the ComCom itself has already released the nuclear option and Chorus' self-preservation defence of reducing speeds would be contractually sanctioned. If the TelCos wanted more bandwidth they would have to enter into a new contract at possibly the old prices as opposed to the reduced price - in other words the consumer would be paying the same price as they are paying at the moment.

If return on capital is unreasonable then NZ will never get anyone willing to invest in infrastructure unless it is guaranteed or financed by the taxpayer. Of course, I imagine the Greens would be in favour of that and a large state involvement.

So what, then, is the minimum bandwidth under the contract, and how does that compare to what customers currently get? If they are similar, then the nuclear option is anything but nuclear.

Situations like this tend to get worked out, in time. Usually both parties make some concessions and a middle ground is achieved. While stock prices are irrelevant to corporate operations, the fact that Chorus stock has already declined so far means in any resolution, the dividend will be half or less of the prior dividend - simply because the stock price already anticipates that so why should any compromise agree to more?

Simply put, it is politically damaging to the minority parties if their support for ComCom meant that customers got less, or paid more. I still have a hard time seeing the nuclear option as being consistent with the decision and the politics.

[Harvey Specter]

Minimum is about 2x dial up so 100kb I think. Adsl and vdsl can be over 2 and 5mb I think so significantly different. Vdsl, if you are close enough to the exchange is comparable to the entry level fibre.

I agree with CNU, don't threaten nuclear, keep it up your sleeve for the ambush. And ideally, only in areas where fibre is an option.

[USbasedInvestor]

Thanks, Harvey Specter. I agree about not threatening. Nothing good comes from that. It should only be a last resort.

Now, how widespread is DSL in use? If most have 100kb, then nuclear is not even an option. If most have DSL, then it is. This is why this nuclear option confuses me: if most folks have 100kb, the price cut hurts Chorus. If most people have DSL service, then there was no need for Chorus to make grim statements about cash flow declines as they could simply lower the price of 100kb (serving few) and maintain DSL pricing (serving most) at present levels. Why be Chicken Little and cry the sky is falling if in fact it is not?

That logic suggest to me that most use the 100kb option, and hence the nuclear option is not what it is cracked up to be. Am I missing something?

(It has been awhile, I had completely forgotten that DSL also varied based on your distance from the Central Office.)

[Harvey Specter]

Now, how widespread is DSL in use? If most have 100kb, then nuclear is not even an option. If most have DSL, then it is. This is why this nuclear option confuses me: if most folks have 100kb, the price cut hurts Chorus. If most people have DSL service, then there was no need for Chorus to make grim statements about cash flow declines as they could simply lower the price of 100kb (serving few) and maintain DSL pricing (serving most) at present levels. Why be Chicken Little and cry the sky is falling if in fact it is not?

I'd say most of the country is on broadband, not dial up which means they are getting speeds of 1Mb/s+ depending on how close to the exchange they are. As such, dropping back down to near dial up speeds would not be an option as even basic sites like facebook would become slow.

I am not close enough to the exchange to get VDSL so will never get near fibre speads using copper. Luckily I should have access to fibre by end of the year

One thing to remember is that high speed broadband over copper is really only highspeed download, upload is normal about 10% of that speed, so fine for youtube etc but not perfect for online backups, HD video conferencing etc.

Rather than making numbers up, here is actual speeds:
Source: https://www.truenet.co.nz/articles/d...oadband-report

Note that only Wellington and Chch have access cable so less than 1/2 the population and it will surely be decommissioned once fiber is available.