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Does Key want to nationalise Chorus Soviet style?

Written By: - Date published: 2:46 pm, November 5th, 2013 - 62 comments
Categories: capitalism, Economy, john key, national, same old national, telecommunications - Tags:

I blogged previously about Chorus and the Commerce Commission.  The draft decision from the Commission would have seen a significant reduction in broadband prices.  Chorus complained, Amy Adams brought out a discussion paper suggesting the Government would not follow the decision, and John Key suggested that Chorus could go broke.

The opposition to the proposed intervention came from an interesting variety of sources.  Opponents include well known communist sympathisers  Matthew Hooton and David Farrar who have both publicly opposed the proposal.  Farrar said about the suggestion that Chorus would go broke:

But the reality is that Chorus would not go bust under the draft determination. They do not say they will. The market analysts do not say they will. Yes the draft determination will adversely impact their profitability and dividends, and that is bad for Chorus shareholders like myself. But that is one of the risks of investing in regulated monopolies.

The Commerce Commission has now released its final determination on the broadband charge for Chorus and the net result is a slight lessening of the reduction in charges.

Instead of celebrating Chorus have come out and hinted that its future viability may be at risk.  It has said that the ability to complete the roll out will be compromised.  It has said that unless the Government steps in now, it will discuss the matter with its lenders and rating agencies, notify its bank of a material adverse effect which could trigger a default,  and “discuss with the Crown whether Chorus is still a credible UFB partner in the way intended at demerger and how Chorus might deliver the balance of its programme despite the very material funding gap in Chorus’ business implied by [the Commerce Commission] decision.”

But as I noted before Chorus’s problems appear to relate to the tender that it signed with the Government, and that the Commerce Commission review has been in the pipeline for some time.

I understand that Amy Adams has said that the Government will now sit down with Chorus to look at the numbers and come back with some options.

Pauls Brislen, head of TUANZ has come out and castigated the Government for its handling of the issue.  He has released a press statement containing the following:

“Our view is that the Commerce Commission has applied Steven Joyce’s 2011 telecommunications legislation correctly and, at $34.44 per month, has come up with a fair price.”

Mr Brislen urged the government to let the benefits of the Commerce Commission ruling flow through to Kiwi households and businesses.

“Any price the government might now propose above $34.44 per month would represent an obvious tax on Kiwi households and businesses in order to subsidise Chorus, an already highly profitable monopolist.  Even $35.50 would transfer over a million dollars a month from Kiwi households and businesses to Chorus shareholders, to no benefit to anyone else.”

Mr Brislen said any suggestion today’s price decision could have an impact on the rollout of the government’s ultra-fast broadband initiative (UFB) was “plain wrong”.

“The government has contracts with Chorus and others to build the new world-class fibre broadband network. Ministers should tell them to just get on and do it.

“The 30% of New Zealanders who are expected to want UFB by 2020 and the 75% of Kiwis who will eventually have access to it want it built to contract, while those who will never access to it obviously don’t want to pay a copper tax,” he said.

Mr Brislen said it would be wrong for there to be further confidential calls between Chorus chair Sue Sheldon and the prime minister on the matter.

“There must be transparency in the dealings between regulated monopolists and the government.”

The behaviour of this Government is extraordinary.

It sells off well functioning strategically important assets.  It mismanages others.  It has mucked up the broadband regulatory process and the roll out of fibre that badly that the entity responsible for the roll out is seeking to back out.  It appears to now be doing a shonky back room deal so that a large Corporate can maintain its profitability.  The quality of the decision making in each of these areas is appallingly bad.

If ever you wanted to see what a mess the Government is in on this issue then watch the following question from parliament.  And enjoy …

Update:  David Farrar sets out very elegantly why the Government should not directly deal with Chorus and should instead take its time on this issue.

62 comments on “Does Key want to nationalise Chorus Soviet style? ”

  1. ghostwhowalksnz 1

    Two little words Rio Tinto , come to mind again.

    How much will this cost us for them to have a ‘happy ending’ in their talks with National government

  2. tc 2

    Could just be shonkey deploying some CT nuanced positioning so when he does finally actually do something he looks like a saviour. He’s not so stupid as to say this without a longer term play

    So then the fan club (hoots/Farrar etc) can all doff their caps to the genius of the all knowing PM as a way of controlling the message again.

    On the other hand this could be THE longer term play, to have a taxpayer funded buy out of chorus shareholders for NewZild’s good.

  3. Ad 3

    Possibly the first time Key has been bested in 5 years.

    Shame on Chorus for not pricing their original bid properly in the first place, and further shame for the gall of asking to be propped up for a low bid.

    Both Labour and National are clearly now highly interventionist parties.

    So far my tax dollars are propping up Sky City, Warner Borthers, Rio Tinto, (whoever wins Transmission Gully), and now Chorus.
    The question for the election campaign will then become: who do you trust most to use your taxpayer dollar wisely (in economic intervention)?

    This will require smart points of difference to be driven home by Cunliffe.

    Key failing to rule out nationalisation is a massive tactical blunder that Labour will continue to play all the way to Key’s demise.

    It’s therefore a massive signal to small and medium local businesses that Key will continue to reward the major corporates and shut the locals out of competitive bidding. The huge majority of local businesses just want a competitive chance on a level playing field, and Key keeps jamming the procurement door shut with my tax dollars.

    • Francis 3.1

      Of course, Key would probably never consider nationalising them. He’d just hand them a blank check and ask nothing in return 0_o

      Personally, I would be incredibly happy if he did bring the telecommunication infrastructure back into public ownership (where it should always have stayed). Then, any profits would be ensured to either be reinvested in the network or go to the country as a whole, rather than a handful of rich investors (most of them living overseas).

  4. Tim 4

    Good to know. So my provider will receive $34.44 per month for that component.

  5. Richard 5

    Oh dear. Please send that moronic muppet Eric Roy back to Invercargill.

    • Tim 5.1

      You mean that thing that was pretending to be Mr Speaker? I’d send him a damn sight further south than Invercargill!

  6. BLiP 6

    What I don’t get is that when it comes to John Key’s Sky City scam National Ltd™ is all over the place talking about the sanctity of contract law yet when it comes to Chorus that contract can be rewritten to highly favour another party? Hypocrisy much, John?

    • ghostwhowalksnz 6.1

      Rio Tinto were able to tear up their contract they agreed to a few years back, and were given the $30 mill for the inconvenience of paying a new lower price- and Im sure thats was just the first installment of ongoing ‘golden parachute’

  7. ianmac 7

    The 30million bailout of Rino Tinto was really to protect the jobs of the workers.
    The multimillion bailout pending for Chorus is really to protect the jobs of the workers.
    Believe it because English/Key will tell us that this is true!
    Let us skirt around that the contract with Chorus may have tendered far too low but hey! We all make little mistakes so let us applaud the National for being “flexible” with contract law. Right?

  8. infused 8

    Like I’ve said before, Chours need a kick in the ass.

    Chours fucked up big time when taking on the tender for the fibre rollout. Now their sub contractors are pulling out because Chours keep reducing profits.

    Leave them on their own.

  9. Tracey 9

    Its so confusing… govt is just a shareholder in mrp so has no say in buy backs by directors at rock bottom prices… but is on the phone with chorus about operational matters.

  10. SpaceMonkey 10

    It’s distressing to watch twits like John Key making a mockery of Parliament.

    He had the audacity to use Kiwirail as an example of wasteful Government spending when it was his cronies (a la Fay and Richwhite & Berkshire Partners) who fleeced the organisation of any value and frustrating one of their other partners, Wisconsin Central Railroad, in the process. Toll bought a lemon in 2003… renationalisation was probably inevitable from the day the pirates cashed out.

    • framu 10.1

      It’s distressing to watch lying scum bags like John Key making a mockery of Parliament.

      hes not really a twit – he knows hes bullshitting

    • Draco T Bastard 10.2

      Renationalisation was inevitable from the announcement to sell. This applies to Telecom/Chorus, Rail and power. It was inevitable that the private sector would run them down in their drive for profit and that us taxpayers would have to step in to prevent any further run down of our critical infrastructure.

      • SpaceMonkey 10.2.1

        It’s a win both ways for John Key. It either creates another opportunity for John Key to increase Government debt borrowed from his bankster mates or, if not renationalised, it creates another opportunity for the ownership of Chorus to be redirected to his bankster mates.

        Is anyone taking odds yet on which financial institution John Key is going to “consult” for post-2014 elections?

  11. Rogue Trooper 11

    Question Time.
    Q.10- Curran to Adams on the government’s position concerning the Chorus claims.

    Adams-obfuscation and more than a little (feigned? ) ignorance, qualifying considerations as “concern for the end-user (of UFB)”.

    David Cunliffe 😉 quotes Kiwiblog… 😉 (comes in handy for something, sometimes)
    “Verify Chorus’s claims”

    which appeared to go whoosh over the top of Adam’s swede.

    • Naturesong 11.1

      05.11.13 – Question 12: Clare Curran to the Minister for Communications and Information Technology Will the Government abide by the final Unbundled Bitstream Access Service Price Review determination issued by the Commerce Commission today? David Cunliffe’s supplementary at about 2.25 http://inthehouse.co.nz/node/21738

      • Naturesong 11.1.1

        Apparantly I’m a spambot, so all carrage returns have been stripped from my comment 😕

        Not going to use Tor anymore when browsing thestandard 🙁

        • lprent 11.1.1.1

          There are some pretty aggressive anti-spam tools on this site. This is what allows the site to operate without generally requiring captchas or logins for comments. The downside of it is (as you discovered) that coming from any system that has been tagged as a spambot in the past tends to get highly unfairly treated.

        • Rogue Trooper 11.1.1.2

          yes Naturesong, you are very correct, it was Q.12. -I plead fatigue, needed a tea-break. Ta.

        • Rogue Trooper 11.1.1.3

          Google Chrome works fine, fast and dandy Naturesong.

    • tc 11.2

      They’ve known the cost for years, as it’s always been their network to underinvest in when they created the bid, so why now.

      Gosh what would the $5m+ p.a man Reynolds do, maybe they should give him a call as a key player in that deal with fixit Joyce as the glue appears to have come unstuck.

      The advice would probably be ‘ give it all ya got laddie, look it’s that unbundling guy coming back bigger than before…’

      • Draco T Bastard 11.2.1

        Gosh what would the $5m+ p.a man Reynolds do…

        Telecom have been systematically under-investing in the network so as to maximise dividends since it’s sale in 1990. We can’t really blame Reynolds for all of that.

  12. bad12 12

    In broad brush figures, befor taxation, dividends, i just about wrote kickbacks, and various other bites at the cherry from it’s profits Chorus earned around 600 million dollars in the last financial year,

    At the most, the Commerce Commission decision will take away a hundred and some million dollars from that profit leaving Chorus 400 and something million,

    Slippery the Prime minister is then Lying through His teeth with His claim that Chorus will go to the wall if the Commerce Commission’s pricing is allowed to stand,

    Part of me, the evil little part, hopes that the Shyster we currently have as PM does promote Legislation in the House with the aim of protecting the profits of Chorus shareholders, it may not be much of an issue in the level of society where my bones reside but among His own it will be the hammering of the nails into the coffin of this Slippery Government of shysters and shylocks…

  13. Matthew Hooton 13

    MS says: “But as I noted before Chorus’s problems appear to relate to the tender that it signed with the Government.”

    FFS. Chorus doesn’t have any problems at all. It paid $95 million in dividends last year!

    • Rogue Trooper 13.1

      and, aha? May we politely enquire of your revised position Matthew.

    • bad12 13.2

      Chorus through their number one spokesperson on the issue, Slippery the Prime Minister, are now claiming that the pricing set by the Commerce Commission puts the ultra-fast fiber roll out in danger of not being able to be completed???

      What exactly the f**k has either of these two things got to do with the other is the question i would ask, Chorus is a profitable piece of monopoly capitalism which knows it’s pricing is subject to Commerce Commission rulings if that organization is now saying that the price it tendered to gain the fiber roll-out was being subsidized by it’s over-all business then more fool them,

      As a business Chorus has the ability to further spread the risk/cost of the fiber roll-out,(if as they are now saying they tendered too low to gain the contract), through bank lending just like any other business does…

    • mickysavage 13.3

      I was referring Matthew to the report that Chorus had undercooked the tender by $500 million.

      I agree that Chorus should just wear this and get on with things. It may be less profitable but it is still profitable. The shareholders may see their dividends drop but the only word that I can think of is “diddums”.

      Chorus has admitted that it underestimated the costs of the UFB roll out by $300 million. Deutsche bank thought it was more like $500 million. Whatever the figure is the company and the shareholders should wear it, not consumers.

      • Matthew Hooton 13.3.1

        Ok, take your word for it, haven’t read their accounts that closely. But I have certainly heard they were hundreds of millions less than anyone else on UFB, which is why they got the contract. But that is just a risk they took as a commercial enterprise so I don’t know why the govt has any further interest. Business is about taking risks. And if you manage your risks well you make great profits. And if you don’t you don’t.

        • geoff 13.3.1.1

          And yet history shows that if large businesses get into financial difficulty, taxpayers end up bailing them out.

      • geoff 13.3.2

        What was the total tender price?

  14. Ant 14

    Requesting to table the hollowmen dvd and book is pretty LOL

  15. Tracey 15

    Its not revised its paid for…

    hes an expert on telecommunications now. Has Ecretium updated the website yet

  16. RedBaronCV 16

    The Nacts – we buy, we sell. MOM models. How does Treasury feel about this one?

    Chorus – we choose. Bankruptcy or cutting senior staff pay to maintain shareholder dividends.

    Sorta lose, lose, lose. Best laugh for a longtime

  17. infused 17

    I think regardless, you will see the majority of National supporters not agreeing with National/Key on this one.

  18. hoom 18

    Does anybody know what Chorus mean by this bit hidden down the bottom of their press release?

    “Chorus is now set to take up its option to move to a full economic cost model for the UBA price.”

    It looks awfully like they believe they are only voluntarily following the Commerce Commission determinations with the right to break away & charge whatever the hell they want.

    • Colonial Viper 18.1

      Sounds like a contractual option that the govt has given them. They are playing with fire if they intend to deliberately antagonise NZ though.

  19. vto 19

    Corporate social welfare has exploded under this government.

    Socialising private enterprise losses has exploded under this government.

    This government simply runs loose and wild and doesn’t know whether it is Arthur or Martha.

    It is the biggest hand-outs government we have ever seen, handing out money and favour to corporates willy-nilly left right and centre.

    Why can’t the corporates and private enterprise stand on their own two feet? Why do they keep running to Nanny Key crying wah wah wah all the time? Why do they want to get welfare handouts all the time? It just goes to prove that they simply do not perform to the level that they think they do – best example being the useless NZX. The NZX is always crying ‘wah wah wah we don’t have enough capital, wah wah wah, hey taxpayers we need to take your businesses to build up our private trading company because the business community is not capable of doing such itself. Sub-example – NZX wanted to boost its capital base with power companies. Why didn’t these great captains of industry set up their own power companies? Free market sitting there, increasing prices for the product, consistent demand for it. But nup, nobody could do it for them so the NZX comes crying to the taxpayer. What a bunch of fucking bludging pussies.

  20. vto 20

    Chorus

    Gambling

    Corporate welfare

    Whaleoil

    Asset sales

    Rivers

    East Christchurch

    Compulsive lying

    John Banks

    Colin Craig

    Kim Dotcom

    ffs, she’s all head winds for this government, and all so well deserved…… shame we have to suffer the results of their incompetencies

  21. burt 21

    So nationalising under Labour is good but under National it’s bad. What a fucking joke you partisan whack jobs are.

    As for that fruit loop Dracko saying the biggest mistake was selling Telecom. Perhaps he/she has their head so far up their own ass that they can’t remember how many millions of tax payers money was being poured into the inefficient monopoly.

    I guess when you believe your team are good and they stand for state owned and controlled everything you just can’t be rational… Hence; wouldn’t it be great if power was a state monopoly … But only if Labour do it.

    • felix 21.1

      “can’t remember how many millions of tax payers money was being poured into the inefficient monopoly”

      We’re pouring millions into it now burt. We just call it “profit” so idiots like you don’t notice.

    • Draco T Bastard 21.2

      Perhaps he/she has their head so far up their own ass that they can’t remember how many millions of tax payers money was being poured into the inefficient monopoly.

      the amount was $0 burt. Telecom was running a surplus right through the 1980s and that surplus was entirely spent on upgrading the network. It’s how we got the most of the network we have today and the digital exchanges across the country. If we’d kept it as is we wouldn’t have to now be pouring in billions of dollars to get FttH as it would already be being rolled out from that same surplus with no extra taxpayer $$$. Instead we sold it, the surplus went as dividends to the profiteers and now we’re having to pay out billions in taxpayer $$$ to get what we’ve already paid for.

      The only fruit loops around here are the RWNJs that believe that deregulation and selling Telecom has made NZ better off when the facts clearly show that we’re tens of billions of dollars worse off. The social harm done is probably far worse.

    • thatguynz 21.3

      Sometime Burt it is better to keep your mouth shut and have everyone think you’re an idiot, than to open it and confirm it.

  22. Ad 22

    John Key is the most socialist government New Zealand has had since Muldoon.

    It’s not only the list of corporates he’s prepared to to put my tax dollars into proppoing up, it’s also the massive distrust he shows in regulators or businesses to balance their own affairs.

    Consider the number of RMA decisions that have been called in quite unnecessarily.
    The re-regulation of Auckland Council and of Christchurch.
    The Hawkes Bay dam. The Canterbury irrigation scheme.

    Only an ardent socialist would fear the judgement of both independent regulators and of citizens to balance their interests, and believe that only the state – represented by his omnipotent and omnipresent self – can make sound economic judgements.

  23. Rogue Trooper 23

    Herald Editorial Bite The Bullet Amy

    • hoom 23.1

      Also http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11151998

      “While the Government makes up its mind, a Chorus spokesman confirmed yesterday that the company was getting the commission to go through a “final pricing principle” (FPP) review to work out the wholesale charges.

      The spokesman said it was Chorus’ right under the law to ask for this review.

      This can take years to complete and will see the commission use a different and far more complex model than for yesterday’s decision. The length of the FPP process is one argument the Government has advanced in favour of intervention.

      Instead of benchmarking against prices from markets similar to New Zealand, the FPP process involves a full analysis of the cost of Chorus building a replacement network from scratch, and working out prices from that.”

      They can’t be serious that they think they should be able to charge the equivalent cost for a brand new replacement network? O_O
      They started with an existing comprehensive network when Telcom was privatised & have never had to bear the cost for that in the first place.

      • Rogue Trooper 23.1.1

        sadly, the reporters commentary (wishes) on One News suggested National are likely to re-write the contract or over-ride the Commission’s findings in law. Yep, fastest law-makers in the west outback and beyond the black stump.

  24. Rogue Trooper 24

    Test

  25. lez howard 25

    Here , Here VTO Most of them couldnt run a bath. Let alone a corner store Too much apathy in NZ

  26. phil 26

    Go Burt! Let’s hear your point of view, complete with facts or evidence to support your opinion. The Standard needs challenging, intelligent, informed, insight. Step up and convince me.

  27. acn 27

    Exceptional weblog the following! Also your web blog considerably upwards quickly! What exactly hosting company are you currently utilizing? Can I buy your internet marketer url on your host? If only this site filled up as speedily when you hahah

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