About this time last year we wrote a blog piece about Chorus reviewing its financial security arrangements with retail service providers (RSPs) like DTS, and asking RSPs to pay twice their monthly spend with Chorus as a security.
A year on, Chorus is still making this demand.
Frankly, it’s ridiculous, and here’s why.
It’s hard to think of a worse disincentive to business. If a company typically spends around $100,000 a month with Chorus, its security payment would be $200,000. Few companies have that sort of money lying around and, if they did, could it not be better spent on new equipment, more infrastructure, jobs and R&D?
The Ultrafast Broadband Agreement with Crown Fibre has left Chorus as the monopoly provider. Despite this, the tendency now will be for each RSP, including DTS, to lessen its spend with Chorus by taking its business elsewhere wherever possible. How is it good business to drive your customers to the competition?
We know of some RSPs in New Zealand who have such a large monthly spend with Chorus that providing them with two times their bill is actually putting their business at risk as the pressure on their cash-flow has become enormous. The likely result of enforcing such a procedure is that many of these companies will become two months behind paying their bills. Does Chorus want this? Does anybody want this?
And imagine if you are a start-up company where every dollar counts towards getting your business established. Forking over twice your projected monthly spend in one foul swoop is really going to hurt and slow you down.
And in the end it is customers who may suffer most, as money that would normally have been invested in providing the best service possible is diverted away unnecessarily.
Okay, so some customers may be regular late payers and in such cases a required security payment may be justified. Many others, such as DTS, are not and it is unfair that the same policy is applied to these good customers. The official line is that procedure will ensure Chorus treats all RSPs the same – as per its contract with Crown Fibre. However, we hardly think ‘equivalency’ has anything to do with whether or not customers are paying on time.
Instead what we think Chorus should do is have a point at which payment terms are deemed to have been breached. This then triggers the security payment requirement. It should apply that principle uniformly, but not arbitrarily suck money from the market to address an issue that doesn’t exist.
I happen to be on the Board of the Internet Service Providers Association of New Zealand (ISPANZ) and have invited Chorus to front up to our AGM in May to explain why they want to put in place barriers to business and cash-flow, and endanger services to customers. Time will tell whether they front up and just how much sense their rationale will make.