WEBVTT - How Chorus built our $5.5B world-class fibre network 0:00:03.480 --> 0:00:03.920 Kiota. 0:00:04.400 --> 0:00:07.640 Welcome to Shared Lunch, brought to you by Shares's. My 0:00:07.760 --> 0:00:10.200 name is Susanna Batley and I'm the general manager of 0:00:10.200 --> 0:00:14.760 Shares's business. In today's episode, we'll be talking to Mark Owah, 0:00:15.240 --> 0:00:19.520 CEO of Chorus. We'll be talking about the huge potential 0:00:19.760 --> 0:00:23.040 that digital infrastructure can offer our tetoa, as well as 0:00:23.079 --> 0:00:26.560 what's next for the talco. Before we get started, though, 0:00:26.800 --> 0:00:28.280 here are some important information. 0:00:28.960 --> 0:00:32.040 Investing involves risk you might lose the money you start with. 0:00:32.320 --> 0:00:36.080 We recommend talking to a licensed financial advisor. We also 0:00:36.120 --> 0:00:40.040 recommend reading product disclosure documents before deciding to invest. Everything 0:00:40.120 --> 0:00:42.159 you're about to see and here is current at the 0:00:42.200 --> 0:00:42.959 time of recording. 0:00:43.440 --> 0:00:43.559 Hi. 0:00:43.680 --> 0:00:44.840 Mark, welcome to Shared Lunch. 0:00:45.479 --> 0:00:46.760 Thanks you, Sanna, thanks for having me. 0:00:47.040 --> 0:00:49.760 I'm really excited to get into this conversation about Chorus, 0:00:50.240 --> 0:00:52.400 but before we do that, I'd like to start with 0:00:52.479 --> 0:00:55.720 you back. You've had over two decades in the industry 0:00:55.880 --> 0:00:59.920 across the UK, Australia and are Tetoa, and you've also 0:01:00.040 --> 0:01:03.360 had previous roles as CEO of Two Degrees as well 0:01:03.400 --> 0:01:06.080 as CFO of voteraphone New Zealand which is now one 0:01:06.160 --> 0:01:10.080 New Zealand. So what first attracted you to the sector, 0:01:10.440 --> 0:01:11.920 and why have you stayed there so long? 0:01:12.880 --> 0:01:16.920 It's fast paced. I enjoy technology and I enjoy change, 0:01:16.959 --> 0:01:20.240 but I think what's really kept me in the industry, 0:01:20.319 --> 0:01:23.600 both overseas and coming back home to New Zealand is 0:01:23.600 --> 0:01:28.360 that ability of connectivity to truly shape and enable better futures. 0:01:28.480 --> 0:01:30.800 And it's helping to shape the way that we live 0:01:30.880 --> 0:01:33.880 from an intergenerational impact, and I love that generally for 0:01:33.920 --> 0:01:34.280 the better. 0:01:34.480 --> 0:01:37.679 You'd say quite a few people that have worked at 0:01:37.680 --> 0:01:40.560 two degrees talked about how much you took that purpose 0:01:41.319 --> 0:01:45.920 approach to the organization two degrees obviously in the B 0:01:45.959 --> 0:01:48.520 two C space in the retail space. How does that 0:01:48.600 --> 0:01:51.639 change being at Chorus and as a B to B player? 0:01:52.720 --> 0:01:55.720 Yeah, look, I mean purpose for cause is something I'm 0:01:55.760 --> 0:01:59.800 really personally passionate about. I have five children, so I've 0:02:00.400 --> 0:02:02.320 I want to leave this place in a better state 0:02:02.560 --> 0:02:05.120 than when I joined it. And two degrees was such 0:02:05.120 --> 0:02:07.520 an amazing place to be able to put that foundation 0:02:07.800 --> 0:02:10.799 of a core purpose in there, and that was around 0:02:10.800 --> 0:02:12.799 fighting for fear to make New Zealand a better place 0:02:12.840 --> 0:02:15.600 to live, and that was the key challenge that decisions 0:02:15.600 --> 0:02:17.920 that the business was taking If it wasn't making New 0:02:17.960 --> 0:02:20.000 Zealand a better place to live, then we should stop it. 0:02:20.639 --> 0:02:23.560 And that's the whole beauty of purpose when it actually 0:02:23.600 --> 0:02:27.080 builds some momentum and that you can truly drive positive 0:02:27.200 --> 0:02:30.240 societal outcomes. And so we're trying to do the same 0:02:30.240 --> 0:02:35.079 thing in Chorus now, but albeit coming from a slightly 0:02:35.120 --> 0:02:40.240 different perspective, and we talked about unleashing potential through creativity 0:02:40.480 --> 0:02:44.320 and enabling better futures for altiet Or and again I 0:02:44.320 --> 0:02:46.280 think that goes back to my view of what's kept 0:02:46.320 --> 0:02:49.080 me in the industry as well, and being able to 0:02:49.280 --> 0:02:53.000 improve lives and help shape them for future generations. And 0:02:53.000 --> 0:02:54.480 whether you're in a B two C or in you're 0:02:54.480 --> 0:02:57.360 a B to B space, that the ability of large 0:02:57.520 --> 0:03:01.040 enterprise to actually drive positive society or outcome is really material. 0:03:02.800 --> 0:03:06.079 And the origins of Chorus was that it was originally 0:03:06.080 --> 0:03:09.280 spun out of Telecom, which for those old enough like 0:03:09.360 --> 0:03:12.240 myself remember as the former Spark. 0:03:13.280 --> 0:03:14.200 Could you talk a bit. 0:03:14.080 --> 0:03:18.440 About why Corus started, why it was spun out of 0:03:18.840 --> 0:03:21.440 Spark or Telecom back then, and then also a bit 0:03:21.480 --> 0:03:22.480 about the business today. 0:03:23.000 --> 0:03:26.840 Sure, I mean you go back to two thousand and 0:03:26.919 --> 0:03:30.320 eight and that's where the first proposals were to bring 0:03:30.800 --> 0:03:34.640 high speed fiber connectivity to the majority of New Zealand. 0:03:35.240 --> 0:03:37.920 And back then you'd recognize there was a fair amount 0:03:37.960 --> 0:03:40.880 of pushback to doing this, but you actually had a 0:03:40.920 --> 0:03:44.680 small group of visionaries that really pushed for that change 0:03:45.040 --> 0:03:47.440 and had the courage and the persistence to keep doing 0:03:47.440 --> 0:03:50.520 it when actually very few markets or countries around the 0:03:50.520 --> 0:03:53.800 world were even doing that. And it was premised on 0:03:54.160 --> 0:03:58.160 creating an open access platform and network built off a 0:03:58.240 --> 0:04:01.040 public and private partnership, which I think we could all 0:04:01.080 --> 0:04:04.560 recognize now and looking back that this is probably one 0:04:04.560 --> 0:04:08.920 of the most successful examples of private and public working 0:04:08.960 --> 0:04:13.560 together in partnership to deliver now what is an amazing 0:04:13.600 --> 0:04:16.400 network by global standards, and we bat well above our weight, 0:04:16.480 --> 0:04:20.400 you would say from a New Zealand perspective, You're right. 0:04:20.440 --> 0:04:23.000 It was spun out of Telecom, as it was for 0:04:23.040 --> 0:04:26.160 those old enough, and I certainly am, but that was 0:04:26.240 --> 0:04:29.360 essentially so that Telecom could actually compete as part of 0:04:29.400 --> 0:04:33.120 the UFB, the Ultra Fast Broadband Initiative, and so it 0:04:33.200 --> 0:04:35.480 spun off the retail arm which we know today is 0:04:35.520 --> 0:04:40.760 now Spark and the wholesale arm of actually building, running, managing, 0:04:40.839 --> 0:04:45.640 maintaining the fiber networks into what we see as chorus today, 0:04:46.520 --> 0:04:49.480 you know, and that's where we see ourselves today from 0:04:49.520 --> 0:04:52.040 a retail to a wholesale perspective. We are the wholesale 0:04:52.080 --> 0:04:56.080 partner of the fiber network and also copper, but we're 0:04:56.080 --> 0:05:00.320 getting out of copper. Fiber is the gold standard that 0:05:00.640 --> 0:05:05.120 you would look to. But our roles around that ongoing investment, maintenance, 0:05:05.240 --> 0:05:08.920 running the network, working with the retail service providers the 0:05:09.080 --> 0:05:13.000 RSPs as they're known, to provide the products, the plans 0:05:13.120 --> 0:05:16.640 and the network essentially that they then are selling into 0:05:16.680 --> 0:05:18.600 market from a retail perspective. 0:05:20.440 --> 0:05:24.480 And just going into those retail sellers or resellers that 0:05:24.520 --> 0:05:28.200 you work with, you've obviously worked for them before running 0:05:28.279 --> 0:05:30.960 running through degrees and at votafone New Zealan or one 0:05:31.000 --> 0:05:35.279 New Zealand, as we mentioned at the start, do you 0:05:35.320 --> 0:05:37.599 see them just as partners or are they starting to 0:05:37.640 --> 0:05:38.839 become competition as well? 0:05:38.839 --> 0:05:40.640 How does that dynamic dynamic work? 0:05:40.720 --> 0:05:43.480 Well, look, competition is definitely alive and well I think 0:05:43.560 --> 0:05:47.560 you know where today we have five G fixed wireless 0:05:48.279 --> 0:05:51.200 and five G is a very different product to four 0:05:51.279 --> 0:05:57.120 G from a wireless broadband perspective, and that's there's competition 0:05:57.240 --> 0:06:00.880 in market now for some of those fiber customers. And 0:06:01.480 --> 0:06:03.440 you know, to be clear, there is a market for 0:06:03.520 --> 0:06:06.479 multiple broadband technologies. You know, we're seeing that advent with 0:06:06.600 --> 0:06:11.440 Starlink and the Leo satellites as well and the exit 0:06:11.480 --> 0:06:17.120 progressively from data legacy copper technology. But yeah, they are 0:06:17.160 --> 0:06:20.040 our partners, We work with them, we work through them 0:06:20.080 --> 0:06:25.039 to actually grow our own fiber customer base. But equally, yes, 0:06:25.160 --> 0:06:26.880 recognizing they are also competitors. 0:06:28.320 --> 0:06:30.760 A Deloitte report earlier this year say to that the 0:06:30.760 --> 0:06:33.440 digital fiber network has the potential to bring in thirty 0:06:33.480 --> 0:06:36.200 three point two billion dollars to the New Zealand economy 0:06:36.240 --> 0:06:40.320 by twenty thirty three. What do you see the potential 0:06:40.360 --> 0:06:43.080 barriers to us being able to realize this sort of 0:06:43.120 --> 0:06:45.479 benefit on the scale. 0:06:45.960 --> 0:06:49.360 Yeah, and it was a great report from Deloitte. And 0:06:49.839 --> 0:06:52.839 actually that thirty three billion dollars by twenty thirty three 0:06:52.920 --> 0:06:55.080 is just the annual benefit. You know, when you're actually 0:06:55.080 --> 0:06:58.880 looking at the cumulative benefit between now out to twenty 0:06:58.920 --> 0:07:01.880 thirty three, is that over one hundred and sixty billion 0:07:01.960 --> 0:07:04.839 dollars of economic benefit. And I think again that's a 0:07:04.880 --> 0:07:08.320 testament to that vision back in two thousand and eight 0:07:08.360 --> 0:07:11.920 to actually bring this network to New Zealand. You know 0:07:11.920 --> 0:07:14.400 some of those barriers, So the first is probably around 0:07:14.400 --> 0:07:17.280 coverage an expansion of fiber. So today we sit it 0:07:17.440 --> 0:07:20.560 just over eighty seven percent of our population that are 0:07:20.600 --> 0:07:25.720 covered by fiber, so thirteen percent the country aren't. We'd 0:07:25.760 --> 0:07:29.520 see a definite use case to grow that fiber expansion 0:07:29.520 --> 0:07:32.360 out to ninety five percent. Because of New Zealand's topography 0:07:32.400 --> 0:07:36.680 and geographic dispersion of the population. Probably doesn't you know, 0:07:36.720 --> 0:07:40.200 the economics don't work beyond ninety five percent. But actually 0:07:40.320 --> 0:07:42.840 that's one of the leaders and drivers to getting to 0:07:43.280 --> 0:07:46.240 recognize that economic benefit is being able to expand it. 0:07:46.960 --> 0:07:50.720 Today New Zealand ranks seventeenth in the world for fiber uptake, 0:07:50.760 --> 0:07:53.080 which is quite an amazing stat for a country with 0:07:53.240 --> 0:07:55.960 five million people. And again the topography that we have 0:07:56.080 --> 0:07:59.440 to actually build this network, but we've got to stay 0:07:59.440 --> 0:08:02.200 at the fore of that. You know, those visionaries put 0:08:02.280 --> 0:08:04.800 us out there when other countries and markets really weren't 0:08:04.800 --> 0:08:07.720 looking at this. You know, that same ranking, if you 0:08:07.760 --> 0:08:10.760 compare that to Australia are at fifty fifth the UK 0:08:10.880 --> 0:08:13.240 at sixty six, so it's nice to be on the 0:08:13.920 --> 0:08:17.200 right side of those for a change. But expansion is one, 0:08:17.600 --> 0:08:22.000 digital equities another, so ensuring that no one's really left 0:08:22.000 --> 0:08:27.560 behind from this digital world today, the government statistics which 0:08:27.680 --> 0:08:30.880 would estimate one in five people across our sed or 0:08:31.040 --> 0:08:35.320 are actually digitally excluded, which is roughly about ten percent 0:08:35.360 --> 0:08:39.560 of households. That seems like a staggering statistic, particularly when 0:08:39.600 --> 0:08:44.600 you consider that that we're increasingly becoming more digitized, so 0:08:45.200 --> 0:08:48.600 services like core government or retail services or access to 0:08:48.640 --> 0:08:52.960 health services that are becoming increasingly digitized, So the risk 0:08:53.040 --> 0:08:56.640 to being digitally excluded is probably is growing, if anything. 0:08:57.320 --> 0:08:59.360 So I think those are the two key ones in 0:08:59.360 --> 0:09:04.360 the third odd call loud as having appropriate regulation, whether 0:09:04.440 --> 0:09:08.960 that's too new products like fiber or it's too legacy products, 0:09:09.000 --> 0:09:10.960 and being able to have a pathway to exit from 0:09:11.000 --> 0:09:15.560 those like copper. You know, a regulatory frameworks need to 0:09:16.120 --> 0:09:21.400 encourage investment and promote competition, not stifle it. So and 0:09:21.400 --> 0:09:23.200 I think we've got some work to do in that space. 0:09:24.480 --> 0:09:26.840 Yeah, great, and I'd like to circle back on those, 0:09:27.880 --> 0:09:30.760 you know, on that question whether the regulatory framework is 0:09:30.760 --> 0:09:34.120 appropriate right now. But on those first two points, on 0:09:34.480 --> 0:09:37.320 ensuring that the economics work to increase that coverage to 0:09:37.640 --> 0:09:40.559 whether it's ninety five percent or whatever that number is, 0:09:41.400 --> 0:09:45.520 and also that social equity point, how do you think 0:09:45.600 --> 0:09:50.439 about about those economics, because you know, with a new subdivision, 0:09:50.480 --> 0:09:52.959 for example, I imagine that the economics can look really 0:09:53.000 --> 0:09:56.240 good because, as I understand it, most of the cost 0:09:56.360 --> 0:09:59.719 of installation is in thinking those trenches and putting that 0:09:59.760 --> 0:10:03.040 PI in. And with a new development, you're already doing 0:10:03.080 --> 0:10:07.000 that with electricity and plumbing and all those other infrastructural 0:10:07.040 --> 0:10:11.200 requirements that that that new that new dwelling requires. And 0:10:11.240 --> 0:10:15.160 also you're probably getting high connectivity rates as well with 0:10:15.320 --> 0:10:18.160 a new development like that if you compare it to 0:10:18.320 --> 0:10:21.760 say to a small rural town where you might get 0:10:21.800 --> 0:10:26.280 lower connection rates, and also the cost is higher the 0:10:26.360 --> 0:10:29.720 marginal cost, because you're having to dig up and do that. 0:10:30.800 --> 0:10:34.280 But obviously, to your point, from a social equity point 0:10:34.280 --> 0:10:35.920 of view, it's really really important. 0:10:35.559 --> 0:10:36.640 That people are connected. 0:10:36.720 --> 0:10:41.600 And given those second order effects, as we're distributing healthcare 0:10:41.640 --> 0:10:45.160 and all these other services digitally, how do you think 0:10:45.160 --> 0:10:48.040 about that and how do you sort of balance those objectives. 0:10:49.400 --> 0:10:52.640 Yeah, so from a new subdivision development. So we think 0:10:52.640 --> 0:10:55.120 about that as MPD is our new property development and 0:10:55.160 --> 0:11:00.000 it's something that that that we work well in across News. 0:11:00.040 --> 0:11:03.400 The only all the fiber areas that Chorus is involved in, 0:11:03.600 --> 0:11:06.680 and you're you're absolutely right where the fiber is already existing. 0:11:06.679 --> 0:11:10.559 And that's the Beau beauty of fiber and why it's 0:11:10.600 --> 0:11:13.000 so scalable because you're not having to go out and 0:11:13.080 --> 0:11:15.840 dig up the trenches and change out all the infrastructure 0:11:15.840 --> 0:11:18.880 every five to ten years. It's actually changing out the 0:11:18.880 --> 0:11:21.440 equipment at either end. So thinking about the exchanges at 0:11:21.480 --> 0:11:24.280 one end and the exchange cards, things that become their 0:11:24.280 --> 0:11:27.200 neighbors or in our homes, our households now where we 0:11:27.240 --> 0:11:29.560 have the little white box on the wall wherever it 0:11:29.640 --> 0:11:33.360 might be, and that's called the ANTS, the optical network terminal. 0:11:33.480 --> 0:11:36.920 So it's really scalable and that's the beauty of fiber. 0:11:37.520 --> 0:11:41.720 But the costs of delivering fiber when you move outside 0:11:41.760 --> 0:11:46.240 those fiber areas and you're building new infrastructure, they become 0:11:46.640 --> 0:11:50.560 exponentially greater. And you know, you can think about an 0:11:50.679 --> 0:11:54.439 urban example and maybe take my street as an example 0:11:54.520 --> 0:11:56.840 and say there's fifty homes in the street and they 0:11:56.880 --> 0:11:58.640 all have a three meter set back from the road. 0:12:00.320 --> 0:12:03.320 We can have a high degree of confidence around the 0:12:03.360 --> 0:12:06.120 costs of those and think about the uptake as well. 0:12:07.000 --> 0:12:10.520 In a rural context, though that same kind of area 0:12:10.640 --> 0:12:13.960 might have one premise and it's five hundred meters set 0:12:14.000 --> 0:12:17.480 back from the road, And as great as fiber is, 0:12:17.920 --> 0:12:22.560 it's these things still cost so that the exponential rate 0:12:23.080 --> 0:12:25.880 of cost versus the returns that we're getting, those economics 0:12:25.880 --> 0:12:29.400 actually become a lot less attractive to do that, which 0:12:29.440 --> 0:12:31.839 is why we then try to work with government around 0:12:32.120 --> 0:12:36.760 new frameworks that would either mirror or evolve from the 0:12:36.800 --> 0:12:41.000 original UFB program to actually take fiber further, maybe to 0:12:41.040 --> 0:12:45.560 that ninety five percent of the population, and interesting at 0:12:45.559 --> 0:12:50.000 the moment, the government's focus and vision around the Infrastructure 0:12:50.040 --> 0:12:53.600 Priorities Plan and having that twenty year vision, we'd certainly 0:12:53.679 --> 0:12:57.760 hope that that has a nod to fiber deployment and 0:12:58.040 --> 0:13:01.120 repeating the scale and benefits of what we saw out 0:13:01.160 --> 0:13:03.840 of the original fiber program and actually taking that to 0:13:03.920 --> 0:13:07.000 the next seven percent. And that same Deloitte report you 0:13:07.080 --> 0:13:11.240 referred to earlier that recognizes going from eighty seven percent 0:13:11.320 --> 0:13:15.000 to ninety five percent population coverage, that that's the equivalent 0:13:15.080 --> 0:13:18.800 of seventeen billion dollars of economic benefit to bringing fiber 0:13:18.920 --> 0:13:22.720 in high speed broadband connectivity to those regions. Part of 0:13:22.760 --> 0:13:26.040 whom are going to need to find a solution for 0:13:26.160 --> 0:13:31.320 digital equity or inclusion. They tend to be the groups 0:13:32.320 --> 0:13:39.080 like digital seniors, lower income households, or families Mary and PACIFICA, 0:13:39.240 --> 0:13:43.079 or people's with disabilities. They tend to be the groups 0:13:43.120 --> 0:13:49.000 that are disproportionately digitally excluded and yet ironically other groups 0:13:49.040 --> 0:13:51.800 that would benefit the most from actually being involved in 0:13:51.800 --> 0:13:54.920 this digital world. So it's not just expansion, as we say, 0:13:54.920 --> 0:13:57.800 it's that digital equity and ensuring that no one's really 0:13:57.880 --> 0:13:59.400 left behind. 0:14:00.840 --> 0:14:03.520 You've come to the end of a very large period 0:14:03.720 --> 0:14:07.920 of cap x or capital expenditure building the fiber network 0:14:07.960 --> 0:14:11.880 that effectively replaces the old copper network. What actually happens 0:14:11.920 --> 0:14:13.079 to the copper network. 0:14:13.400 --> 0:14:16.600 Our first challenge is actually having a pathway to exit 0:14:16.679 --> 0:14:19.040 from copper and this is something that we've pushed with 0:14:19.120 --> 0:14:23.280 the government and regularly discuss with both government and the 0:14:23.320 --> 0:14:28.000 Commerce Commission. We need a pathway to exit from legacy 0:14:28.000 --> 0:14:33.880 technologies that are no longer fit for purpose. You know, 0:14:34.240 --> 0:14:36.880 there are all better alternatives already available, and if if 0:14:36.880 --> 0:14:39.280 I talk to that for a second, the Comments Commission 0:14:39.360 --> 0:14:43.000 themselves recently published a report looking at the non fiber 0:14:43.040 --> 0:14:45.280 areas of New Zealand, so that thirteen percent of the 0:14:45.280 --> 0:14:50.240 population and ninety seven percent of those premises can already 0:14:50.320 --> 0:14:53.640 receive an alternative to copper technology, so either a mobile 0:14:53.720 --> 0:14:58.080 or an alternative wireless provider. That's before you overlay stalink and 0:14:58.120 --> 0:15:03.200 satellite services, and so there are already alternatives. So we 0:15:03.320 --> 0:15:05.200 need to be able to find a pathway to exit 0:15:05.240 --> 0:15:08.240 from copper. It can't be something that just goes on 0:15:08.520 --> 0:15:13.360 and definitely it's something that is coorus. Ourselves are saying 0:15:13.560 --> 0:15:17.440 that these networks are not for purpose. There are better 0:15:17.480 --> 0:15:19.960 alternatives available, so let's get out of it. And for 0:15:20.160 --> 0:15:22.640 a dollar spent on copper is not the most efficient 0:15:23.200 --> 0:15:25.800 or effective use of that dollar spend. You'd prefer to 0:15:25.840 --> 0:15:28.800 put that into other investment that's going to go to 0:15:28.840 --> 0:15:32.440 better the country. So that's our first challenge is to 0:15:32.720 --> 0:15:36.600 have an exit to copper, and then the second is 0:15:36.640 --> 0:15:39.560 thinking about, well, what's the ability for us to recover 0:15:39.760 --> 0:15:44.200 that copper or extract it. Not all copper is created equal. 0:15:44.280 --> 0:15:48.960 There's large gauge small gauge copper, and it's not as 0:15:49.000 --> 0:15:50.960 simple to actually get it out of the ground either, 0:15:51.040 --> 0:15:53.920 so but there are use cases actually and you see 0:15:53.920 --> 0:15:57.040 that around the world of companies actually moving beyond their 0:15:57.080 --> 0:16:00.400 legacy technology so copper, and actually removing it from the ground. 0:16:01.320 --> 0:16:04.480 We'll lease talk a bit more about the regulation. 0:16:04.720 --> 0:16:08.760 Obviously a big part of coorus being regulated by the 0:16:08.760 --> 0:16:12.440 commis Commission and them setting what you can earn. 0:16:12.880 --> 0:16:13.560 Can you just talk a. 0:16:13.560 --> 0:16:17.280 Bit more about how the regulator currently does that and 0:16:17.360 --> 0:16:19.960 some of the terminology that we hear such as. 0:16:19.920 --> 0:16:25.000 MAR, the MAR, the RAB. The talco industry is renowned 0:16:25.320 --> 0:16:31.000 for scronyms absolutely, so the RAB is our regulated asset 0:16:31.040 --> 0:16:35.320 base and which is essentially the capital that's been spent 0:16:35.360 --> 0:16:37.600 on the network and course today to spent around five 0:16:37.640 --> 0:16:41.600 and a half billion dollars on building this amazing network. 0:16:42.640 --> 0:16:46.960 So that's essentially the foundation of our RAB. Now there's 0:16:46.960 --> 0:16:51.800 a very complicated formula that then the Commerce Commission will 0:16:51.840 --> 0:16:56.080 work out what the MAR is the maximum allowable revenue. 0:16:56.240 --> 0:17:00.880 But essentially the regime, the regulated regime set up in 0:17:01.000 --> 0:17:05.040 order to provide a greater degree of certainty and that 0:17:05.160 --> 0:17:09.399 Chorus can earn a regulated return on that capital investment. 0:17:10.440 --> 0:17:13.879 But that complicated formula will take into our whole into 0:17:14.040 --> 0:17:17.119 account a whole bunch of drivers such as you know 0:17:17.160 --> 0:17:21.600 your capital spend, your depete depreciation profile, your whack, your 0:17:21.640 --> 0:17:27.600 asset beader, your leverage, your tax building blocks. So and 0:17:27.680 --> 0:17:30.359 what it will do at the end is essentially split 0:17:30.359 --> 0:17:34.080 out a number that would say, based on your regulated asset, 0:17:34.119 --> 0:17:37.399 based on what you've spent. This is in theory the 0:17:37.440 --> 0:17:41.760 maximum allowable revenue that Chorus could return could earn over 0:17:41.800 --> 0:17:45.080 a period, and that's probably where there's a secondary complication 0:17:45.240 --> 0:17:51.119 to it because Chorus is subject to defined regulatory periods. 0:17:51.200 --> 0:17:56.880 So our first period PQP one was only three years long, 0:17:57.119 --> 0:18:00.679 ran from its finishing at twenty twenty f twenty two 0:18:00.720 --> 0:18:04.720 to twenty five end of twenty twenty four, so that 0:18:04.800 --> 0:18:07.720 sets it for a three year period. And actually Coorus 0:18:07.800 --> 0:18:10.760 now for the last year and a half or so 0:18:10.800 --> 0:18:13.280 has been in this process of doing a submission for 0:18:13.320 --> 0:18:18.560 our second regulatory period PQP two. We've had earlier this year. 0:18:18.960 --> 0:18:22.879 Our allowances have been determined by the Commerce Commission, so 0:18:22.960 --> 0:18:26.160 that sets an envelope for our operating costs and our 0:18:26.160 --> 0:18:30.520 capital costs, and then we have our MAR determination which 0:18:30.560 --> 0:18:33.639 is due to come hopefully in early December, and that 0:18:33.720 --> 0:18:37.360 will again set the framework out for that MAR across 0:18:37.359 --> 0:18:39.200 what will be a four year period, so this will 0:18:39.280 --> 0:18:41.439 run to from twenty twenty five through to the end 0:18:41.440 --> 0:18:43.359 of twenty twenty eight. 0:18:44.880 --> 0:18:49.840 You've called for deregulation in the sector this year, and 0:18:49.880 --> 0:18:51.560 when I think about it, you know, when we look 0:18:51.560 --> 0:18:53.800 at the lakes of Spark and two degrees in One 0:18:53.840 --> 0:18:56.679 New Zealand, they all run their own mobile networks. So 0:18:56.720 --> 0:19:00.000 as you pointed out earlier, you are definitely subject to competition, 0:19:00.280 --> 0:19:02.720 at least at the margin. And if you're a household 0:19:02.760 --> 0:19:05.440 where you're not streaming lots and lots or downloading lots 0:19:05.440 --> 0:19:08.960 and lots then probably using the mobile network as as 0:19:09.000 --> 0:19:12.280 a viable option. Then you've also got starlink and the 0:19:12.320 --> 0:19:16.000 lacks of those other players coming in as well, which 0:19:16.040 --> 0:19:19.439 is a bit different to I guess other industries or 0:19:19.520 --> 0:19:22.760 other companies that are heavily regulated, like an airport or 0:19:23.320 --> 0:19:25.320 a Talco line. 0:19:25.840 --> 0:19:26.639 You know that you are. 0:19:26.520 --> 0:19:30.040 Facing competition and yet still the Commics Commission determines what 0:19:30.080 --> 0:19:33.880 you can earn. If the industry was to regulated, how 0:19:33.920 --> 0:19:36.439 would consumers ultimately benefit from that, do you. 0:19:36.440 --> 0:19:40.040 Think, well, I mean, i'd point to the Commission earlier 0:19:40.080 --> 0:19:45.280 this year having done a review for of fiber deregulation 0:19:45.600 --> 0:19:49.280 or five year regulation as it is, and not seeing 0:19:49.880 --> 0:19:53.200 enough of a change where you'd say, actually, they're going 0:19:53.200 --> 0:19:57.760 to step into an investigation. So you know, when I 0:19:57.800 --> 0:20:02.480 call out regulation and deregulation from a fiber perspective, I 0:20:02.480 --> 0:20:06.840 think Chorus is subject to a lot more stringent regulation 0:20:06.960 --> 0:20:09.199 even compared to the other local fiber companies. You know, 0:20:09.240 --> 0:20:13.119 there are three others through the country. Chorus has a 0:20:13.119 --> 0:20:18.560 majority of the fiber infrastructure, but we're already doing a 0:20:18.560 --> 0:20:21.120 lot more than they are having to provide under our 0:20:21.119 --> 0:20:24.480 regulatory regime. And then your rights c enter you call 0:20:24.480 --> 0:20:28.000 out from a mobile perspective, it's essentially not there that 0:20:28.160 --> 0:20:32.359 we don't have the same constraints or regulatory requirements in 0:20:33.080 --> 0:20:37.240 a wireless world. So it is quite different, and it's 0:20:37.240 --> 0:20:41.359 something that we'd like to see given competition that starts 0:20:41.400 --> 0:20:44.639 to actually even out. At the same time, there's a 0:20:44.640 --> 0:20:48.000 certain degree with fiber regulation that it does provide greater 0:20:48.359 --> 0:20:51.159 certainty about that framework, so that you know, we've just 0:20:51.200 --> 0:20:54.600 talked to a regulated framework as well. So I mean 0:20:54.640 --> 0:20:59.359 from a consumer perspective, it would be a fundamental change 0:21:00.000 --> 0:21:03.719 because at the moment, Chorus can't retail, so we have 0:21:05.280 --> 0:21:08.200 our entire frameworks based off being a wholesaler and working 0:21:08.280 --> 0:21:12.439 with the retail service providers. So changes to deregulation and 0:21:12.480 --> 0:21:15.280 fiber we'd probably push in the first instance that we're 0:21:15.320 --> 0:21:19.119 at least only subject to the same regulations that the 0:21:19.160 --> 0:21:24.560 local fiber companies are. Beyond that, there's regulatory obligations that 0:21:24.600 --> 0:21:30.000 we have around service availability and performance. And the fiber network, 0:21:30.000 --> 0:21:34.320 by the way, is the only broadband technology that is 0:21:34.560 --> 0:21:38.160 regulated to have more supply than there is demand, which 0:21:38.200 --> 0:21:42.400 is why there's almost this loop of capital investment required 0:21:42.440 --> 0:21:47.080 because our usage just continues to grow. But Corus is 0:21:47.080 --> 0:21:50.320 the only one that has that. You think about that 0:21:50.359 --> 0:21:54.080 from a customer experience perspective about you, But my kids 0:21:54.119 --> 0:21:56.680 at home pretty quick to tell me when they think 0:21:57.080 --> 0:21:59.520 the Wi Fi is not working and the broadband's not working, 0:21:59.720 --> 0:22:01.960 which they can't understand why when their dad does what 0:22:02.040 --> 0:22:05.960 he does. So anyway, that's a that's a different story. 0:22:05.960 --> 0:22:08.600 But yeah, that you don't have that same kind of 0:22:08.760 --> 0:22:11.879 condition conditionality in a wireless world. 0:22:13.560 --> 0:22:16.679 Yeah, I was thinking a bit about you know, with boardband, 0:22:16.800 --> 0:22:20.080 we do we continually expect more for less every year. 0:22:20.200 --> 0:22:24.399 We expect faster times and more without actually paying a 0:22:24.520 --> 0:22:28.040 higher monthly bill. So with that in mind, how do 0:22:28.080 --> 0:22:31.479 you think about growth going forward? Outside of population growth, 0:22:31.840 --> 0:22:33.600 what are some of the other drivers that can help 0:22:33.720 --> 0:22:35.040 sort of grow grow the industry? 0:22:35.480 --> 0:22:37.479 Yeah, I mean, let me pick up first on the 0:22:37.560 --> 0:22:40.040 on the data point, because I always I find this 0:22:40.160 --> 0:22:42.720 quite fascinating, and it goes back to your opening question. 0:22:42.960 --> 0:22:45.440 You know why this industry because I love how dynamic 0:22:45.480 --> 0:22:50.520 it is and having access to high speed fiber connectivity 0:22:50.960 --> 0:22:55.520 has fundamentally changed the way that we all live, learn, 0:22:56.359 --> 0:22:59.320 work and play. And we saw that even more so 0:23:00.040 --> 0:23:05.359 during the pandemic for COVID and being at home heavily 0:23:05.400 --> 0:23:09.560 restricted but still actually being able to work and live 0:23:10.160 --> 0:23:13.520 and order takeaways and get them dropped at your door. 0:23:13.560 --> 0:23:16.800 But it's fundamentally changed the way that we live. So, 0:23:17.520 --> 0:23:19.960 you know, even though it might seem like we're providing 0:23:20.000 --> 0:23:23.080 the same sort of service as we were back when 0:23:23.160 --> 0:23:27.440 Chorus first started with the UFB initiative, it's fundamentally changed. 0:23:28.240 --> 0:23:32.240 To give you another statistic, ten years ago, even the 0:23:32.320 --> 0:23:35.440 average data usage in New Zealand per month was forty 0:23:35.480 --> 0:23:43.800 gigabits gigabytes. Sorry, it's now over six hundred gigabytes. We 0:23:43.840 --> 0:23:48.399 now do the annual usage from ten years ago in 0:23:48.520 --> 0:23:54.159