Commission releases first profitability report for regulated fibre providers
The Commerce Commission has published its first report on how profitable New Zealand’s regulated fibre companies are, finding varying profitability across the providers which needs ongoing monitoring.
The Commission looked at each company’s return on investment (ROI) and compared it with an inflation adjusted benchmark, weighted average cost of capital (WACC), to see whether any company might be earning more than is reasonable. This is part of its ongoing role, to monitor providers’ returns to ensure New Zealanders continue to receive reasonably priced, high-quality fibre services.
2023 and 2024 key findings
Providers who earned more than expected
Northpower Fibre and Enable Networks earned higher‑than‑expected returns. For Northpower, this was mainly because it could use tax losses from previous years, so it didn’t need to pay tax during this period. It also recorded lower depreciation costs because its Financial Loss Asset is written off over a longer period.
Enable Networks earned more than the benchmark largely because it reduced its operating costs in the short term due to potential efficiency gains from its operating expenditure. It also uses longer asset lives for some of its equipment, which lowers its yearly depreciation costs.
Providers who earned less than expected
Tuatahi First Fibre and Chorus earned less than the benchmark, meaning they did not make excessive profits. Chorus is also subject to price‑quality rules, which limit how much revenue it can earn and require it to meet minimum service quality standards.
Supporting transparency and long‑term outcomes
Given the assessment where some providers are earning above the WACC benchmark, the Commission plans to take a closer look at how information‑disclosure‑only providers set their prices, as pricing has a major impact on their returns. The Commission will work more closely with providers to better understand their performance. It welcomes feedback to help improve future profitability reports and is actively monitoring providers reporting higher‑than‑expected returns.