The Commerce Commission this week released a draft decision proposing a new cost-based price for Chorus' broadband Unbundled Bitstream Access (UBA) service. Purchasing this service allows telecommunications companies to supply broadband services to customers without having to replicate Chorus' local copper lines, electronics and software.

Following the de-merger of Telecom and Chorus, the Commission is required to establish a cost-based price for UBA, which is currently set on a retail-minus base. The unbundled copper local loop (UCLL) is a significant component of the cost-based price of the UBA service, and the Commission has made separate final decisions to moderately reduce the price of UCLL services. For UBA, the Commission must also benchmark the likely additional costs of supplying UBA by examining prices in countries that calculate the relevant electronics and software costs in a specified way.

This approach has led the Commission to reach a preliminary view that the price of UBA should be significantly reduced with effect from 1 December 2014.

The Commission will consult on the draft decision and intends to release its final benchmarked price for the UBA service in June 2013.

The draft decision has raised a greater level of Ministerial comment than is normal for decisions by independent regulators, given that it raises issues regarding the uptake of UFB services. Prime Minister John Key has said that the Government will await the Commission's final decision before determining what, if any, response is necessary.

Submissions on the Commission's draft decision are due by 1 February 2013. The draft decision and more information about making a submission can be found here.