Next steps on the post 2020 regulatory review announced

Chorus Limited
Level 10, 1 Willis Street
P O Box 632
Wellington 6140
New Zealand
Email: company.secretary@chorus.co.nz





STOCK EXCHANGE ANNOUNCEMENT

10 February 2017


Next steps on the post 2020 regulatory review announced

The Government has today released a further Discussion Document as part of its
review of the regulatory framework that will apply from 2020, which sets out final
views on the approach to UFB fibre services, and new proposals for copper services
for feedback.

The Government has departed from the previous combined copper and fibre regulated
asset base proposal. The key changes are:

 The final decision is that UFB fibre will be regulated under a traditional utility
style building block model framework. The initial valuation of the UFB fibre
network will be determined by the Commerce Commission based on
unrecovered historic costs. For an initial period until 2023, Chorus will be
regulated under a revenue cap with anchor products. The price of the initial
voice and broadband anchor product (100/20Mbps) will be set based on 2019
prices, adjusted for inflation. The form of control can be reviewed by the
Commission from 2024, subject to approval by the Minister. Unbundling is
required with prices set commercially until 2024, when the Commission can
investigate whether or not prices should be set on a cost-oriented basis.
 The proposal is that copper will be de-regulated and the Telecommunications
Service Obligation (TSO) will be removed where UFB or other fibre is available.
 In other copper areas, prices will be set at 2019 prices with no inflation
adjustment and the TSO will remain in place.
“The proposal to treat copper and fibre separately in the regulatory framework is a
change from the Discussion Document in July 2016. This raises some additional
complexity for regulatory implementation, such as cost allocation, that we will need to
consider carefully. In addition, it raises questions around incentives to invest in the
high cost rural areas currently served by copper. We look forward to engaging further
on this, to ensure that customer needs are met, along with consideration of whether
investors can earn a fair return,” said Vanessa Oakley, Chorus General Counsel and
Company Secretary.

A copy of the Discussion Document can be found here
www.mbie.govt.nz/telcoreview. Chorus looks forward to considering today’s
announcements in more detail, participation in the review and completion of
legislation this year.
ENDS

For further information:

Nathan Beaumont
Stakeholder Communications Manager
Mobile: 021 243 8412
Email: nathan.beaumont@chorus.co.nz

Brett Jackson
Investor Relations Manager
Mobile: 027 4887808
Email: brett.jackson@chorus.co.nz