Chorus Limited v Minister for the Digital Economy and Communications
[2022] NZHC 3602
•22 December 2022
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2021-485-572
[2022] NZHC 3602
UNDER the Judicial Review Procedure Act 2016 IN THE MATTER OF
the Telecommunications (Regulated Fibre Services) Regulations 2021 and Part 6 and Schedule 1AA to the Telecommunications Act 2001
BETWEEN
CHORUS LIMITED
Applicant
AND
MINISTER FOR THE DIGITAL
ECONOMY AND COMMUNICATIONS
First RespondentGOVERNOR-GENERAL
Second RespondentAND
COMMERCE COMMISSION
First Intervener
SPARK NEW ZEALAND LIMITED
Second IntervenerVECTOR LIMITED
Third Intervener
Hearing: 30-31 May 2022 Counsel:
T D Smith and J Papps for the Applicant
T Smith, S Connolly and C Sykes for the First and Second Respondents
J Every-Palmer KC and J Wass for the First Intervener Appearances excused for the Second and Third Interveners
Judgment:
22 December 2022
JUDGMENT OF GWYN J
CHORUS LIMITED v MINISTER FOR THE DIGITAL ECONOMY AND COMMUNICATIONS [2022] NZHC 3602 [22 December 2022]
TABLE OF CONTENTS
Introduction [1]
Retail telecommunications services in New Zealand [5]
Legislative framework [8]
UFB Initiative [32]
The position prior to 1 January 2022 [37]
The position after 1 January 2022 [47]
Empowering provisions [52]
Telecommunications (Regulated Fibre Services) Regulations 2021(Regulations) [61]
Grounds of review [72]
First cause of action: error of law in recommendation [73]
Second cause of action: Regulations outside empowering provision [74]
Evidence [76]
Chorus [76]
Minister [77]
CIP [78]
MBIE [79]
Vector [80]
Spark [87]
Commerce Commission [92]
Submissions [93]
Statutory purpose [99]
Consistency with previous understandings and other transitional limitations [115] Interrelationship of the relevant documents; incorporation by reference [118] “Freezing” effect of incorporation [123]
Enforcement/CIP’s role/Industry Forum [145]
Contractual certainty [157]
Second cause of action – are the Regulations inconsistent with the objects and intention of the empowering provisions? [164]
Consistent use of terms [177]
The Minister’s reasons for recommending the Regulations [180]
Analysis [187]
Purpose [187]
Empowering provisions [201]
Constraint clause [202]
“UFB contract” [204]
Interrelationship/Incorporation [210]
“Not materially different” [222]
Uncertainty [238]
Enforcement [244]
Consistency of language [245]
Findings in relation to the causes of action pleaded by Chorus [247]
Relief [250]
Orders [259]
Costs [260]
Introduction
[1] Chorus Limited (Chorus) is a provider of wholesale telecommunications services. Chorus has brought this judicial review application to challenge the lawfulness of regulations that specify the terms on which Chorus must initially supply certain “declared” services. Chorus says the regulations do not comply with the relevant transitional provisions in the Telecommunications Act 2001 (Act).
[2] The first respondent is the Minister for the Digital Economy and Communications (Minister) who has responsibility for recommending the Governor- General make, by Order in Council, regulations under the relevant provisions of the Act. The Governor-General is the second respondent.
[3] The Commerce Commission (Commission) was granted leave to intervene in the proceeding.1 The Commission is required to enforce compliance with the Regulations and will be required to consider recommending new regulations in future when it conducts reviews under ss 208 and 209 of the Act.
[4] Spark New Zealand Limited (Spark) and Vector Limited (Vector) were also granted leave to intervene, as retail service providers purchasing fibre networking services from Chorus (and, in Vector’s case, sometimes a competitor of Chorus in the fixed fibre market).
Retail telecommunications services in New Zealand
[5] The evidence provided for the Commission by Wendy MacLucas, acting Fibre Manager, usefully summarises retail communications services in New Zealand.
[6]They are principally supplied over three technologies:
(a)the legacy copper network;
1 Chorus Limited v Minister for the Digital Economy and Communications, HC Wellington CIV- 2021-485-572, 4 February 2022.
(b)fibre broadband networks, in particular those constructed under the Ultra-Fast Broadband (UFB) initiative; and
(c)mobile and other wireless technologies, including satellite.
[7]The key participants in the market are:
(a)Chorus, which is a wholesale-only provider that owns the legacy copper telephone network and the largest fibre broadband network constructed under the UFB initiative. Smaller, regional UFB networks are owned by the local fibre companies (LFCs) – Enable, Northpower and Tuatahi (formerly Ultrafast Fibre).
(b)Chorus and LFCs sell wholesale services to retail service providers (RSPs) that in turn use a combination of these services and their own assets to provide retail voice and broadband services to end-users. End- users contract with the RSP, not with Chorus, which is prohibited from supplying retail services to end-users.2 RSPs include Spark and Vector.
(c)Three of the RSPs – Spark, Vodafone and 2Degrees – also own mobile (cellular) networks, which they use to supply voice, message and data services to mobile end-users, as well as fixed wireless access (FWA), which is a broadband service provided over wireless technology to homes and other premises.
Legislative framework
[8] The Act created an industry-specific regulatory regime for telecommunications. Part 2 of the Act created an access regime to provide for the Commission to determine the terms of interconnection between networks (which had been the subject of long-running dispute between Telecom New Zealand Limited (Telecom) and the first new entrant into the market, Clear Communications) and the terms of wholesale access to Telecom’s copper-based business and residential services
2 Telecommunications Act 2001 (Act), Part 2A, subpart 3, particularly s 69O.
for resale in competition with Telecom’s retail arm. This involved the creation of “designated services” which retailers could purchase to give them access to Telecom’s monopoly network in order to supply their own services. Those that purchase wholesale services from Telecom are known as “access seekers”. The regime introduced by Part 2 provided for the Commission to set prices and other terms for access seekers where negotiations failed.
[9] The Part 2 regime was amended in 2006 by the Telecommunications Amendment Act (No 2) 2006. The 2006 Amendment Act gave the Commission responsibility for issuing standard terms determinations for designated and specified services. The standard terms determinations specified the terms on which Telecom was required to supply wholesale services.
[10]The Act required Telecom – and now requires Chorus, as Telecom’s successor
– to supply designated and specified services on the prescribed terms set by the Commission in a standard terms determination. Under this regime, an access seeker wishing to supply a retail telecommunications service using the copper network could purchase all the wholesale component services from Telecom at the price and on the terms that had been determined by the Commission, without having to engage in any further negotiations with Telecom.
[11] The regime does not prevent Chorus from developing commercial alternatives. An access seeker can then choose whether to purchase the regulated service or the commercial service. Ms MacLucas’s evidence is that, in some cases, commercial services have proved more popular than the regulated service. For example, the regulated Unbundled Bitstream Access (UBA) backhaul service is largely unused and access seekers have instead tended to purchase a commercial alternative offered by Chorus.
[12] The 2006 amendments also introduced the concept of unbundling into the regulatory regime. This allowed an access seeker to have a choice between reselling the wholesale service provided by Telecom (Chorus) or instead purchasing access to the bare connection infrastructure (the copper local loop) and using its own equipment
to operate that connection to supply the retail service. This enabled greater competition and flexibility.
[13] The 2006 amendments provided for the operational separation of Telecom, which meant that its wholesale and retail arms would operate as separate businesses, although part of the same corporate body. Telecom was required to supply its wholesale services on an “equivalence of inputs” basis, which meant that it was required to supply competitors on the same basis as it supplied its own retail arm.
[14] The regime was amended again in 2011 in response to Telecom’s successful tender for part of the UFB initiative. The UFB initiative was designed to roll out end- to-end fibre connections to individual end-users – known as Fibre to the Premises (FTTP) or Fibre to the Home (FTTH). The UFB Initiative is discussed in more detail later in the judgment.
[15] As a condition of Telecom’s tender, it was required to structurally separate into two separate companies.3 The 2011 amendments to the Act provided for this structural separation. The wholesale business then became Chorus and the retail business ultimately became Spark. Those two companies now operate independently.
[16] Part 4AA required Chorus and the other LFCs to enter Deeds of Open Access Undertakings for Fibre Services (Deeds), which anticipated the supply of unbundled services (known in the Deeds as Input Services), including:
(a)An unbundled point-to-point service, known as the DFAS (direct fibre access service). DFAS is a “layer 1” service that can be used by access seekers both to compete with Chorus in supplying “layer 2” fibre services and as an input to competing network technologies (for example, to connect a mobile cell tower that the RSP uses to supply fixed wireless access (FWA) services in competition with fibre broadband). This enables an unbundled layer 1 connection from a central office to an individual site. For example, this service may be used to provide a fibre broadband connection to a school, hospital or
3 Act, Part 2A.
large business, or to provide a backhaul connection to a cellular telephone tower that is then used to supply mobile data and voice services.
(b)An unbundled point-to-multipoint service, known as PONFAS (passive optical network fibre access network). This is a collection of dark fibre services that enable access to and interconnection with the LFC network. They allow unbundled RSPs to put their own electrics at each end of a fibre circuit. This enables an unbundled layer 1 connection from a central office to multiple end-user sites. For example, this could be used to provide services to multiple residential premises in a street. The Act also provides for unbundled point-to-multipoint services to be declared, such as PONFAS.4 Like DFAS, PONFAS allows access seekers access to the layer 1 infrastructure for the purpose of providing services to end-users that compete with Chorus’ layer 2 bitstream services.
(c)Co-location services, which enable the access seeker to install their equipment in Chorus’ facilities.
[17] Point-to-point and point-to-multipoint unbundled services have been carried over into Part 6 of the Act.
[18] The Deeds require Chorus and the other LFCs to make these services available by way of published Reference Offers in the form of Wholesale Services Agreements between the LFC and access seeker. The Deeds do not specify the price or non-price terms of the services in question,5 but instead require that Chorus and the LFCs:
(a)provide wholesale service under the Deeds on a non-discrimination basis;
4 Section 229.
5 Section 156AD(5) prohibits the Deeds from including price or non-price terms.
(b)design its network to ensure that it can provide the Input Services on an equivalence basis; and
(c)provide the Input Services from 1 January 2020 on the terms of a Reference Offer published by Chorus.
[19] The obligation to provide the Input Services sits alongside the obligation to provide declared services that are specified in Regulations.
[20] As noted, as part of the 2011 reforms, Chorus was required to enter undertakings committing it to providing wholesale services on a non-discriminatory basis (that is, not to discriminate between different access seekers, or between itself and other access seekers, in the supply of broadband services) and to build its fibre network in a way that would enable it to achieve equivalence. Equivalence means that Chorus must supply a service to access seekers and to itself on the same terms and using the same technology.
[21] The Telecommunications (New Regulatory Framework) Amendment Act 2018 (the 2018 Amendment) introduced the new regime for the regulation of fibre fixed line access services (FFLAS), most of which were offered over the network that had been installed under the UFB initiative. It also simplified the regulation of copper services and introduced transitional provisions as the market was expected to shift away from copper services to fibre services.
[22] The UFB networks had been constructed pursuant to contractual arrangements with Crown Infrastructure Partners (CIP), formerly known as Crown Fibre Holdings (CFH), the Crown entity responsible for managing the New Zealand government’s investment in the UFB initiative. Those contracts governed the supply of services by Chorus. Until the 2018 reforms, the Commission was not responsible for regulating the price or terms of fibre broadband services (except to the extent they were an input into the legacy copper services).
[23] Parliament decided to adopt a new regime for the regulation of FFLAS, based on the regime for the regulation of monopoly utilities under Part 4 of the Commerce Act 1986. This was introduced as Part 6 of the Act.
[24] Part 6 introduced a bespoke regulatory regime for fibre fixed line access services, based on Part 4 of the Commerce Act. This involves a building blocks model (BBM) regime. The purposes that the Commission is required to promote are specified in ss 162 and 166 of the Act.
[25] The Act and the regulations provide for two forms of regulation. The first is information disclosure regulation which requires regulated providers to disclose certain information about their operations to enable interested persons to assess whether the purposes of the legislation are being met. The second is price-quality path (PQP) regulation. Price-quality regulation regulates the price and quality of FFLAs provided by registered fibre service providers. Chorus, as a regulated fibre service provider, is subject to price-quality regulation. It must apply the price-quality paths set by the Commission in a s 170 determination – quality standard and maximum price(s) or maximum revenues. While Chorus is subject to both forms of regulation, the other local fibre companies (LFCs) are subject to information disclosure regulation only.6
[26]The purpose of price-quality regulation is specified in s 192 of the Act:
192 Purpose of price-quality regulation
The purpose of price-quality regulation is to regulate the price and quality of fibre fixed line access services provided by regulated fibre service providers.
[27] In broad terms, price-quality regulation under Part 6 involves calculating the revenue required to supply the regulated service (based on the supplier’s RAB (regulated asset base) and other costs) and converting this into a MAR (maximum allowable revenue) which the supplier recovers over each year of the regulatory period.
6 Telecommunications (Regulated Fibre Service Providers) Regulations 2019.
[28] A price-quality path is set for a “regulatory period” and then updated for subsequent periods. The first regulatory period is three years (1 January 2022 to 1 January 2025), with the length of subsequent periods being determined by the Commissioner between three and five years.7
[29] One of the other constraints in the regime is s 201, which requires Chorus to, “regardless of the geographic location of the fibre access seeker or end-user, charge the same price for providing [FFLAS] that are, in all material respects, the same.” This is known as geographically consistent pricing and is aimed at preventing Chorus from charging different prices in different parts of the country – for example, by discriminating between rural and urban users or by charging lower prices in particular areas to deter competition.
[30] As part of Chorus’ price-quality path, the Commission must also specify the quality standards that apply for each regulatory period. Section 194(4) confers a discretion on the Commission as to the quality standards prescribed in a price-quality path. This does not specify the individual terms on which Chorus or LFCs must supply their services to RSPs.
[31] Two particular elements of price-quality path regulation are notable. First, as already indicated, the Commission is required to set an overall “maximum allowable revenue” (MAR) that Chorus is permitted to recover from regulated services, together with associated quality standards that Chorus must comply with. Second, the Act provides for the making of regulations declaring certain services that Chorus must supply and the price and terms on which they must be supplied.8 These include anchor services, DFAS and unbundled services. Regulations have been made for anchor services and DFAS and it is those regulations that are under challenge in this proceeding.
7 Act, s 207(2).
8 Sections 227 and 228.
UFB Initiative
[32] Telecom was selected as a participant in the UFB initiative to develop fibre-to- the-premises broadband networks. On 24 May 2011 Telecom and CFH entered into the Network Infrastructure Project Agreement, under which Telecom agreed to design, build and operate a fibre optic communications infrastructure network in certain geographic areas of New Zealand (the UFB1 NIPA).
[33] It was a condition of its participation in the UFB initiative that Telecom agreed to demerge a new entity, Chorus, to own fixed line network infrastructure previously owned by Telecom.
[34] Chorus was incorporated on 30 November 2011. All of Telecom’s rights and obligations created by the UFB1 NIPA were assumed by Chorus.
[35] In 2015 the New Zealand government decided to extend the UFB Initiative to develop fibre-to-the-premises networks connecting at least 80 per cent of New Zealand households, and commenced a further competitive tender to select participants to develop those networks (UFB2).
[36] On 26 January 2017, Chorus and CFH entered into a further Network Infrastructure Project Agreement under which Chorus agreed to design, build and operate a fibre optic communications infrastructure network in further geographic areas of New Zealand (the UFB2 NIPA).
The position prior to 1 January 2022
[37] Prior to 1 January 2022, the construction of the Chorus fibre network and the provision of services using it was regulated by Crown Infrastructure Partners Limited (CIP) (previously CFL), through the contractual provisions set out in the NIPA.
[38] The NIPA provided that Chorus could only offer services set out in the NIPA, as amended by agreement with CIP from time to time. Chorus was required to offer standard terms that reflected the terms set out in the NIPA. The NIPA:
(a)set out, at a high level, the services that Chorus was required to provide, using its fibre network;
(b)set maximum price levels for those services;
(c)required Chorus to meet quality standards for those services;
(d)required Chorus to provide the services on particular terms; and
(e)provided a mechanism by which Chorus could vary the terms on which it provided the services.
[39] The NIPA required Chorus to develop and offer services on the terms of a Reference Offer. The Reference Offer and the Wholesale Services Agreement were not developed at the time of entry into NIPA, but were anticipated.
[40]The Reference Offer addresses, amongst other things:
(a)specification of the services Chorus will provide to RSPs, within the basic description of the essential characteristics of the service provided in the NIPA;
(b)precise specification of physical aspects of the service, such as the equipment used;
(c)provisions governing the operation of the network;
(d)how orders can be made and changed;
(e)how faults are reported and remedied;
(f)service levels associated primarily with ordering and fault processes; and
(g)contractual issues dealing with variations, liability, termination and so on.
[41]The Reference Offer for an individual service is comprised of:
(a)general terms that apply to all services;
(b)Chorus UFB Services Agreement Service Level Terms, comprising service levels for four groups of services that are offered to RSPs;
(c)the Chorus UFB Services Agreement Operations Manual; and
(d)the Chorus UFB Services Agreement Service Descriptions.
[42] The Reference Offer is required to incorporate general terms known as the Wholesale Services Agreement (WSA). The Reference Offer formed the basis of Chorus’ Wholesale Service Agreements with over 100 RSPs.
[43]Wholesale Services Agreement is defined in the NIPA as:
… the standard wholesale services agreement general terms of the Company [Chorus], together with any particular terms relating to a specific service, as approved by CFH [CIP] from time to time.
[44] The terms of the WSA were further defined in schedule 6 of the UFB1 NIPA as follows:9
(a)The service description. Services means the services to be provided by Chorus in accordance with Schedule 6 (Principles for Services and Pricing);
(b)Access Seeker means a person who is obtaining or has indicated to Chorus a desire to contract for, the Services;
(c)Wholesale Service Agreement means the standard wholesale services agreement general terms of Chorus, together with any particular terms relating to a specific service as approved by CFH from time to time.
9 Network Infrastructure Project Agreement (UFB1 NIPA), Schedule 1.
[45] The WSA had to be consistent with the basic terms set out in the NIPA and were subject to CIP approval. The Reference Offer and WSA contain detailed provisions for making changes to the various documents that form the WSA. Minor changes and some technology changes can be made by Chorus on reasonable notice, but more significant changes are required to be approved by RSPs in the Change Management Forum, an industry forum comprising all RSPs, with MBIE, CIP and the Commission as observer participants. The evidence for Chorus is that, in practice, the Telecommunications Carriers Forum Product Forum (a working group including RSPs, Chorus and the LFCs) is used for this purpose. Amendments to the Reference Offer and WSA required CIP approval, but CIP’s role was limited to confirming that amendments were consistent with the terms set out in the NIPA.
[46] In summary, the Reference Offer and WSA comprised a suite of documents, being:
(a)General Terms, which apply to all services offered by Chorus;
(b)Service Descriptions and Service Level Terms, which provide detailed technical specifications and service levels; and
(c)Operations Manuals, which provide detailed processes for ordering, provisioning, fault reporting and other operational matters.
The position after 1 January 2022
[47] The Commission was required to put the new, BBM regime in place by the Implementation Date of 1 January 2022.10 Implementation involved two steps. First, the Commission was required to publish input methodologies under subpart 3 of Part 6. It did so on 13 October 2020 and 3 November 2020.
[48] Second, the Commission was required to make determinations specifying how each form of regulation would apply to regulated service providers. The Commission
10 The Implementation Date was originally 1 January 2020 but was extended by the Minister under cl 9, Part 2, sch 1AA of the Act.
published its final determinations for PPQ regulation and information disclosure regulation in November and December 2021.
[49] The Act provides for the Governor-General, on the recommendation of the Minister, to make regulations prescribing three sets of services:
(a)Anchor services may be declared under s 227;
(b)DFAS may be declared under s 228; and
(c)Unbundled fibre services (such as PONFAS) may be declared under s 229.
[50] A regulated fibre service provider who is subject to price-quality regulation must provide an anchor service if an anchor service has been declared. The service must be provided:11
(a)in accordance with any prescribed description of the service; and
(b)in accordance with any prescribed conditions; and
(c)during any prescribed period for the service; and
(d)at a price that is no greater than any prescribed maximum price.
[51] Chorus is subject to price-quality regulation under the Act and is therefore required to provide an anchor service.
Empowering provisions
[52] Services may be “declared” by the Governor-General, on the recommendation of the Minister under ss 227-229.
[53]Section 227 provides:
227 Anchor services
(1)The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations declaring a fibre fixed line access service to be an anchor service.
11 Act, s 198(2). There is a parallel provision in relation to direct fibre access services – s 199(2).
(2)The regulations may, in relation to the service, prescribe all or any of the following:
(a)a description of the service; and
(b)any conditions; and
(c)the period during which a regulated fibre service provider who is subject to price-quality regulation must provide the service; and
(d)the maximum price that a regulated fibre service provider who is subject to price-quality regulation may charge for providing the service.
(3)For the purposes of subsection (2)(a), the regulations may, without limitation other than subsection (4), describe a service with reference to any 1 or more of the following:
(a)the geographic area in which the service must be supplied:
(b)the service’s end-users:
(c)the service providers who seek access to the service:
(d)the technical specifications of the service:
(e)any other circumstances in which the service must be supplied.
(4)The Minister must not recommend that regulations be made under this section unless the Commission has, after a review under section 208, recommended that the regulations be made.
(5)Subsection (4) applies unless the Minister is recommending regulations to which either or both of the following apply:
(a)the regulations have no more than a minor effect:
(b)the regulations correct errors or make similar technical amendments.
(6)See clause 14 of Schedule 1AA for requirements relating to the first regulations made under this section.
(7)Regulations under this section are secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).
[54] Sections 228 and 229 in respect of direct fibre access services and unbundled fibre services are in substantially the same terms. Only ss 227 and 228 are in issue in this proceeding. They are referred to as the empowering provisions.
[55] The Act provides for the Commission to conduct a review of an anchor service before the start of each regulatory period, including the first regulatory period.12 In the normal course, the Minister must not recommend the making of anchor services regulations until the Commission has carried out a review under s 208 and
12 Section 208.
recommended that regulations be made.13 The exception to that is where the Minister is recommending regulations which have no more than a minor effect and/or correct errors or make similar technical amendments.14
[56] The Act provides that the first regulations can be made even though the Commission has not carried out a review under s 208 or recommended that the regulations be made. However, there is some constraint on the Minister’s powers to do so.
[57] Schedule 1AA of the Act (transitional, savings and related matters) applies in respect of the first regulations to be made under ss 227 and 228. Clauses 14 and 15 of sch 1AA specify requirements for the first regulations to be made in respect of anchor services and direct fibre access services, respectively. These are referred to collectively as the Constraint clause.
[58]Clause 14 provides:
14 Requirements for initial regulations made under section 227 (anchor services)
(1)This clause applies in relation to the first regulations made under section 227.
(2)Despite section 227(4), the Minister may recommend that regulations be made under section 227 even though the Commission has not carried out a review under section 208 or recommended that the regulations be made.
(3)However, the Minister must not recommend that regulations be made to prescribe a description of the service that is, or conditions of the service that are, materially different from the terms set out in a UFB contract.
(4)The Minister must not recommend the making of regulations under section 227(2)(d) unless the Minister is satisfied that the regulations will prescribe a maximum price that is based on the maximum price that may be charged for providing the service under a UFB contract, with an annual CPI adjustment mechanism.
[59] Clause 15(3) (in relation to direct fibre access services) is in identical terms to cl 14(3).
13 Section 227(4).
14 Section 227(5).
[60] The Minister has recommended, and the Governor-General has made, anchor services regulations under s 227 and DFAS regulations under s 228. Those are the regulations that are challenged in this proceeding. No regulations have yet been made in relation to unbundled fibre services under s 229.
Telecommunications (Regulated Fibre Services) Regulations 2021(Regulations)
[61]The Governor-General promulgated the Regulations on 13 September 2021.
[62] The Regulations are the first set of regulations that provide the definition, terms and conditions (including price) of certain basic fibre services that Chorus is required to provide to its customers.
[63] The Regulations declare, and provide a description of service for, three wholesale communications services (two “anchor services” and the “direct fibre access service” or DFAS) that Chorus is required to provide. Regulations 6 to 12 relate to anchor services and regs 13 to 16 relate to direct fibre access services.
[64] The Regulations prescribe service descriptions for the anchor services and the DFAS by incorporating the following documents:
(a)Chorus’ standardised wholesale service agreements (WSA) with individual wholesale customers;
(b)approximately 7,500 pages of telecommunications organisation standards referred to in the WSA; and
(c)a Commerce Commission determination made under Part 6 of the Act, prescribing points of interconnection for the purpose of establishing fibre handover points (SPOIs).15
15 Commerce Commission “Notice of points of interconnection under section 231 of the Telecommunications Act 2001”: DCA-1/1527 (19 December 2019). The Commission notice defines “specified points of interconnection” under s 231 for the purposes of the Act. This term is only used in the definition of “fibre handover points”, which in turn is only used in the definition of “fibre network”: Act, s 5. In effect prescribed points of interconnection determine the scope of regulated fibre network.
[65] For example, in the case of the broadband anchor service, regulation 6(a) provides that for the purposes of s 227(1) of the Act, the broadband anchor service is declared to be:
… a broadband Internet access service with a minimum download speed of 100 megabits per second and a minimum upload speed of 20 megabits per second, provided in accordance with regulations 7 and 8.
[66] Regulation 7 prescribes the description of the service by reference to the “Broadband Anchor Service Description”, defined as the Chorus UFB Services Agreement (Service Description for Bitstream 2 Accelerate) Reference Offer dated June 2017 – that is, the Chorus WSA Service Description, and not the description of the service in Table A of Schedule 10 of the NIPA.16 The description of the services is the entire WSA Service Description including Appendices as modified by Schedule 2 of the Regulations.
[67] For the purposes of reg 7, reg 9 provides that the following documents apply “to the extent that they are relevant to” the WSA Service Description:
(a)the Chorus UFB Services Agreement (General Terms) dated December 2012:
(b)the Chorus UFB Services Agreement (Operations Manual for Bitstream Services) Reference Offer dated July 2021:
(c)the Chorus UFB Services Agreement (Service Level Terms for Bitstream Services) Reference Offer dated October 2020:
(d)the notice of specified points of interconnection, published by the Commerce Commission under section 231 of the Act and dated 19 December 2019:
(e)the TCF UFB Ethernet Access Service Description, version 33, dated 11 May 2017:
16 Telecommunications (Regulated Fibre Services) Regulations 2021, reg 3, “Broadband Anchor Service Description”.
(f)the technical standards listed in Part 1 of Schedule 3.
[68] The first three incorporated documents listed were and, in two cases, are elements of Chorus’ Reference Offer and WSA: the WSA General Terms (but not the most recent General Terms); the WSA Operations Manual and WSA Service Level Terms. Each document is referred to in the WSA Service Description.
[69] The fourth document referred to is the Commission SPOI public notice referred to above. That notice is not referred to in the WSA Service Description or any other of the incorporated documents.
[70] The fifth document is a Telecommunications Carrier Forum document. An earlier version of that document is referred to at cl 2.4.6 of the WSA Service Description.
[71] The final set of incorporated documents for the broadband anchor service are eight technical standards, listed in Part 1 of Schedule 3. Each technical standard is published by an international standards body.17 Many of them are lengthy. For example, the contents page to the first section of IEE 802.3 is itself 55 pages long and covers 636 pages of highly technical material. The overall number of pages of the incorporated documents exceeds 6,500.
Grounds of review
[72]Chorus seeks to review the Regulations. It pleads two broad causes of action:
(a)First, that the Minister committed a reviewable error of law in recommending the Regulations.
(b)Second, that the Regulations are themselves contrary to the requirements of, and are inconsistent with the objects and intentions of, the empowering provisions that applied, including the transitional provisions.
17 See, for example, IEEE 802.3 published by the LAN/MAN Standards Committee of the Institute of Electrical and Electronics Engineers Computer Society: DCA-1/2204, 2206.
First cause of action: error of law in recommendation
[73]The errors of law pleaded are:
(a)The Minister concluded that the “UFB contract” includes the WSA.18
(b)The Minister wrongly interpreted the phrase “materially different”.
(c)The Minister mistakenly thought that the first regulations were required to prescribe a complete set of terms for the Anchor Services and DFAS in order to provide a “fall-back” or “backstop” to negotiation of commercial terms for those services.
Second cause of action: Regulations outside empowering provision
[74] The applicant says that the Regulations are inconsistent with the objects and intention of the empowering provisions, in that they are:
(a)outside the four corners of the empowering provisions;
(b)inconsistent with the objects and intention of the empowering provisions; and
(c)unreasonable and irrational.
[75]In particular, Chorus says that in making the Regulations, the Minister:
(a)Wrongly interpreted the term “UFB contract” to include documents comprising the WSA, on the basis that those documents were incorporated into the NIPA.
(b)Wrongly interpreted the term “materially different” to mean “inconsistent with”. This meant the Minister erroneously believed that terms that were materially different in detail and implications from
18 Chorus conceded at the hearing that the Minister did not understand the UFB contract to include the WSA.
those set out in the NIPA, but not contrary to those terms, could be specified in the first regulations.
(c)Failed to properly direct himself as to the implications of the Legislation Act 2019 which provides that the effect of incorporating the WSA and other documents by reference is to “freeze” those documents, absent amendment of the Regulations.
(d)Wrongly directed himself that the purpose of the first regulations was to provide a comprehensive set of terms for the anchor services and DFAS: a “backstop” or “fall-back” in case commercial negotiation for those services failed.
Evidence
Chorus
[76] Chorus’ application was supported by evidence from Daniel Aldersley, the Head of Consumer and Industry Relations at Chorus. Mr Aldersley describes the UFB Initiative, the NIPA, the services offered by Chorus and its relationship with RSPs and the implications of the Regulations for Chorus’ business.
Minister
[77] The Minister for the Digital Economy and Communications (Minister) has filed an affidavit in which he addresses the immediate background to the Regulations and the policy development process during the course of 2019 and 2021 which led to the passing of the Regulations. The Minister gives evidence as to his reasons for recommending the Regulations.19
CIP
[78] Alan Greenhough, the Chief Technology Officer at CIP, has provided evidence about the creation of CIP, its role in developing and entering into UFB contracts with
19 The Minister’s knowledge and understanding is discussed in more detail at [180]-[186] below.
Chorus, CIP’s role in relation to Chorus’ Reference Offer, including the general terms and conditions of the WSAs, which are required and referred to under the UFB contracts, CIP product oversight (via contract) of Chorus’ activities, prior to the Regulations coming into force, and CIP’s involvement, through consultation with the Ministry of Business, Innovation and Employment (MBIE), and the drafting of the Regulations.
MBIE
[79] James Hartley, the General Manager, Digital, Communications and Transformation at MBIE, has given evidence about the background to government policy on UFB, including the roll-out of the UFB Initiative. Mr Hartley also discusses the initial contractual framework, the passing of the 2018 Act and the policy underlying it. Mr Hartley also addresses MBIE’s consultation on a draft of the Regulations.
Vector
[80] The General Manager of Vector Fibre, Michael Shirley, gave evidence addressing Vector Fibre’s role as a wholesale service provider (WSP), as both a competitor to and access seeker of Chorus.
[81] Mr Shirley describes how Vector Fibre operates a fibre network across the greater Auckland region, providing services to RSPs like Spark, Vodafone, 2 Degrees and Orcon Group, as well as Tier 2 customers to extend their own networks and provide access into buildings to serve end customers. Mr Shirley notes that Vector’s products and services are targeted at the premium business market in Auckland, where Vector tries to differentiate itself from Chorus and provide innovation.
[82] The targeted end-users typically have more complex fibre needs than, for example, residential consumers. Vector Fibre’s business model is to design differentiated layer 2 fibre products to meet its customers’ needs. Mr Shirley says this means that access to layer 1 services from Chorus assumes greater importance, as it is principally through investing in its own layer 2 services that Vector Fibre is able to tailor a differentiated fibre solution for those end customers wanting innovation. This
means that PONFAS – which is a layer 1 service only – tends to be more attractive to Vector than it is to other RSPs who are focussed on residential markets.
[83] In order to provide its services to end-users, Vector is, in many cases, reliant on utilising Chorus inputs. Vector primarily wishes to acquire layer 1 services – being DFAS and PONFAS – from Chorus.
[84] Mr Shirley says that the combination of owning a fibre network and acquiring layer 1 services from Chorus would allow Vector to compete with Chorus in the Auckland wholesale market.
[85] Mr Shirley describes that, as an access seeker from, and a competitor to, Chorus, Vector regularly interacts with Chorus. He describes, and is critical of, Chorus’ dealings with Vector in relation to PONFAS. Mr Shirley notes that, because PONFAS is not a declared service, Chorus is only constrained by the NIPA in respect of designing terms and requirements for accessing PONFAS. Chorus has a greater degree of flexibility in establishing commercial terms for this service than it has under the Regulations.
[86] Mr Shirley states that Vector believes that Chorus is in breach of its equivalence and non-discrimination obligations under the Deed of Open Access Undertakings for Fibre Services. Vector has raised its concerns with the Commission which commenced an investigation in late-2021 and which is currently ongoing.
Spark
[87] Nicolas Haywood is the Regulatory and Industry Affairs Partner at Spark. Mr Haywood’s evidence supports the Minister’s view that the regulated services (the anchor services and the DFAS) will act as a “fall-back” option with RSPs. Mr Haywood says that the value to Spark of the regulated services comes, not so much from Spark’s uptake of those services per se, but its ability to take them up. The regulated services act as a backstop against which Spark can negotiate with Chorus.
[88] Spark does not adopt a position on the legality of the Regulations, but Mr Haywood expresses a view on what would likely occur if the Regulations were set
aside and the provision of the anchor services and DFAS was governed solely by the terms contained in the NIPA. Mr Haywood describes the conditions in the NIPA on which RSPs must be offered access to Chorus’ fibre network as “very high level”. In Mr Haywood’s view, the outcome Chorus is seeking will result in it and the RSPs having to negotiate all of the detailed terms and conditions that are required for the practical implementation of the NIPA. In Mr Haywood’s view, those are the details that matter and which are necessary for RSPs to purchase fibre services from Chorus. That would occur in a context where CIP no longer has a supervisory role and there is no scope for the Commission to be involved in those negotiations.
[89] In summary, Mr Haywood says that Chorus would be free to set the terms for its fibre services which RSPs would then have little choice but to accept. That would result in disruption and uncertainty, that does not promote the long-term benefit of end-users.
[90] In support of Spark’s view, Mr Haywood refers to three previous examples of how, in his words, Chorus has “acted on its natural incentives whenever a gap in the regulatory framework gives it scope to do so.” Those examples are unbundled copper low-frequency service (UCLS), Boost and Fibre 100 price change (Fibre 100).
[91] Mr Haywood’s view is that, notwithstanding the Regulations, Chorus will retain the ability to innovate and respond to competitive constraints as it has done in the past (increasing speeds and introducing new products). Its ability to introduce new services and alter its prices is unconstrainted except in relation to the declared services.
Commerce Commission
[92] The evidence from Wendy MacLucas, the Commission’s acting Fibre Manager, was of considerable assistance to the Court. Ms MacLucas gave an overview of telecommunications markets in New Zealand and the Commission’s regulatory role. Her evidence also discussed the legislative structure of fibre regulation in New Zealand, particularly the Part 6 regime; the processes the Commission has followed to implement the new regime and how the Commission anticipates the new regime will operate after 1 January 2022. Ms MacLucas also describes the anticipated role of declared services in the new regime.
Submissions
[93] The essence of Chorus’ case is that, contrary to the Constraint clause, the Regulations prescribe service descriptions for anchor services and DFAS that are not terms set out in the NIPA, and are materially different from them. Chorus says that the NIPA describes the essential characteristics of the services to be provided but leaves the full terms of service to the WSA to be developed by Chorus and the RSPs, which can be amended from time to time.
[94] At its heart the dispute is whether the Regulations should specify only the essential characteristics of the service (as in the NIPA) and the regulated price, or should effectively specify all contractual terms of supply between Chorus and RSPs, included in the WSA, and various other documents. Chorus says the latter was not intended, is contrary to the Constraint clause and results in inflexibility and a reduction of its competitiveness. In Chorus’ submission, even if the “terms set out in” the NIPA include the WSA (which it denies) the Regulations go beyond that and include other documents that are not incorporated in the WSA or referred to in the WSA.
[95] On Chorus’ interpretation, it would continue to use the Reference Offer and WSA to comply with its obligation to supply the anchor services and DFAS in accordance with the first regulations. No renegotiation of the terms of supply would be necessary or permitted. The WSA would continue to apply as a matter of contract between Chorus and RSPs. However, Chorus and RSPs would be entitled (as they had been previously) to propose changes that were consistent with the NIPA provisions set out in the first regulations, using the WSA change mechanisms. Chorus acknowledges that it could exercise its right to terminate the WSA but termination without cause must be on 12 months’ notice and that timeframe would allow for Commission review.
[96] In response, the respondents say that the NIPA, the Reference Offer and WSA comprise a contractual suite, or “mosaic” of documents, governing the terms on which Chorus has to provide its services to RSPs. The NIPA should be seen as having incorporated the relevant service descriptions and technical standards as set out in the WSA. That interpretation is consistent with the purpose of the Regulations.
[97] The respondents submit that the overarching policy of the regulatory changes is, in large part, to provide for greater regulatory oversight of Chorus. The Constraint clause was aimed at maintaining stability during regulatory transition. Given that, the necessary logic is that the WSA should be preserved, as well as the NIPA.
[98] The evidence and submissions relevant to the different causes of action has a large degree of overlap. The submissions are summarised below.
Statutory purpose
[99] Much of the disagreement between the parties relates to the statutory purpose of the declared services and how they should be regulated in accordance with that purpose. The question of purpose is relevant to both the third error of law alleged in the first cause of action and the second cause of action.
[100]The statutory purpose of anchor services is set out in s 208(7):
208 Anchor services review
(7)The purpose of anchor services is—
(a)to ensure that baseband equivalent voice and basic broadband services are available to end-users at reasonable prices; and
(b)to act as an appropriate constraint on the price and quality of other fibre fixed line access services.
[101] Chorus says the first purpose in s 208(7) is limited to ensuring the availability of the anchor services at “reasonable prices”. That purpose derived from a concern that the transition to a price-quality regime with a general revenue cap might lead to significant price increases and “price shocks”. The purpose is met by regulations that define the service that the regulations apply to and set a maximum price. It does not require prescription of every term relating to the service.
[102] The second purpose, in s 280(7)(b), is to constrain price and quality terms of other, non-anchor services. Chorus says the underlying concept was that if basic services had to be available at a particular price, this would limit Chorus’ ability to price higher quality services to the incremental value customers placed in the quality improvement over the anchor service. That purpose does not require prescription of
all terms required for Chorus to provide the anchor services in order to act as a backstop for negotiations over a commercial variant of the anchor service itself.
[103] In Chorus’ submission, the statutory purpose does not include the purpose suggested by the Minister, to provide a “fall-back” or “anchor” for the anchor services to RSPs that they have the option of taking up without the need for any further agreement. The concept of a “fall-back” is nowhere mentioned in the Act or the legislative history. Chorus says the respondents are confused as to whether the purpose is to provide a “backstop” to anchor services or other services. If this had indeed been the purpose of anchor services and DFAS that could have been easily stated. The applicant refers to aspects of the legislative history which it says are consistent with the express purposes set out in the Act. These include a September 2015 paper “Regulating Communications for the Future: Review of the Telecommunications Act 2001”; a July 2016 Options Paper, and the first reading of the 2017 Amendment Bill.
[104] In response, the respondents say that even if the expression “fall-back” or “backstop” was not used in the Act, the concept was plainly present in the legislative history of the Act. For example:20
Anchor product regulation should provide incentives for UFB providers to innovate and “upsell” end-users to premium services and should support greater product differentiation by RSPs at the retail level.
[105] The respondents’ view is that a “fall-back” or “backstop” option is also a “constraint” on Chorus using its commercial leverage as a monopolistic player. That view is illustrated by the Minister’s affidavit evidence:
… the whole point of regulating the anchor services and DFAS is to put some basic minimum constraints on Chorus and its ability to wield market power. The concern is that if Chorus has flexibility, even on non-price terms, it will have more power to make the regulated anchor services and DFAS sufficiently unattractive that the entire point of having them as a fall-back option will be lost.
[106]And similarly:
20 Ministry of Business, Innovation & Employment “Telecommunications Act Review: Options Paper” (July 2016).
… the overall purpose of the Regulations is to provide a backstop for RSPs of an acceptable standard of service and price that they have the option of taking up, should they be unable to agree to consume services on commercial terms through separate agreements with Chorus. Again, the whole concept underpinning the Regulations is that those services act as an ‘anchor’ for other service offerings that Chorus can offer to the RSPs. Chorus can always offer something more attractive if it wishes to.
[107] The respondents submit that having a “fallback” assures a party dealing with Chorus that they do not have to negotiate, or feel compelled to agree to, further terms with Chorus against the backdrop of Chorus’ position of leverage. Mr Haywood’s view is that RSPs would end up having to negotiate with Chorus all of the detailed terms and conditions required for practical implementation of the NIPA. The purpose of providing constraint under s 208(7)(b) is better met if the parties simply do not have to engage on the issue of further terms. That is achieved by requiring detailed prescription of services.
[108] In any event, the respondents say there is nothing in the language of the empowering provisions to suggest that a prescriptive approach cannot be taken. The respondents accept that cls 14 and 15 of sch 1AA impose a limited constraint on the Minister’s discretion, but point to ss 227 and 228 of the Act which confer a broad discretionary power on the Minister to make recommendations for the prescription of a “description of the service”, when making regulations declaring an anchor service or a DFAS. For example, s 227(3) states that the regulations may “without limitation” describe a service by reference to, among other things, the “technical specifications of the service”.
[109] The respondents rely on the breadth of that discretionary power, read in light of the broad statutory objectives of Part 6 of allowing for greater regulatory oversight of Chorus’ service quality, while also preserving the service description status quo, pending review by the Commission.
[110] Both the respondents and the Commission emphasise that under the previous regime, Chorus was constrained by a quasi-regulatory contractual framework (the NIPA and the WSA), under the supervision of CIP. Under Part 6, it has moved to a more standard regulatory model with further regulations to be made in the future, but
with CIP no longer the gatekeeper. While the Commission now has a role, oversight is ex-post, not ex-ante.
[111] While the Commission does not take a position on the lawfulness of the Regulations or compliance with the transitional provisions, it notes that the empowering provisions leave open the question of how detailed the Regulations should be. In its Input Methodologies reasons paper21 the Commission expressed the view that the declared fibre services – anchor services, DFAS and unbundled fibre services – could specify more detailed terms and conditions for the relationship between regulated providers and access seekers.
[112] In the Commission’s submission, non-price terms (that is, the terms and conditions on which the service is provided) influence the ability of access seekers to acquire the service and the quality of the service and are therefore relevant to the purposes in s 208(7). The Commission says that Chorus may have overstated the extent of contractual certainty provided by the WSA and understated the risk that the purpose of declared services could be undermined absent a high level of detail in the Regulations.
[113] The Commission’s written submissions initially proceeded on the basis that Chorus was arguing that the empowering provisions (ss 227 and 228) do not contemplate that future regulations could ever prescribe the full terms on which the declared services may be supplied. The Commission disagrees with that proposition, but it was clear at the hearing that Chorus was not making that submission.
[114] While there is no express statutory purpose statement for either DFAS or unbundled fibre services, the Commission sees them as important services for access seekers. The prescription of detailed terms may prove to be desirable as, the Commission says, Chorus may be a reluctant supplier of DFAS and PONFAS, which may be used by access seekers in competition with Chorus. The terms of DFAS and PONFAS may need to be prescribed in detail in order to meet the statutory function.
21 Commerce Commission “Chorus’ price-quality path from 1 January 2022 – Final decision – Reasons paper” (16 December 2021) at [7.59].
Consistency with previous understandings and other transitional limitations
[115] The issue of consistency is principally relevant to whether the Minister was mistaken as to the purpose of the first regulations, but also to whether in fact there is a “material difference” between the USB contract and the Regulations.
[116] Chorus says there was a common understanding between MBIE and CIP of the separate nature of the NIPA, Reference Offer and WSA. In correspondence in April and May 2019 in relation to the content of the proposed regulations, MBIE officials recorded their view that the term “UFB contract” meant the NIPA and that the WSA were not incorporated into the UFB agreements. CIP agreed with that interpretation: “Our view is that the WSA is not an agreement between CIP and a UFB Partner and is not a part of the contract documents.”
[117] Chorus says its interpretation of the constraint clause is also consistent with cl 9 of sch 1AA, which is the other significant transitional provision associated with Part 6. Clause 9 addresses the position for the supply of FFLAS during the period that the Implementation Date is deferred. Clause 9(5) provides that, for the period from 1 December 2019 and ending on the date immediately before the new Implementation Date, each “specified contract” continues in force to the extent it relates to: services that CIP and Chorus agreed would be offered and provided; pricing of the services, including terms relating to maximum prices; and service levels for those services. “Specified contract” is defined in relevantly equivalent terms to “UFB contract”. Chorus points to correspondence in October 2019 which shows that it was accepted by CIP and Chorus that the term “specified contract” meant the NIPA and the terms prescribing description of services, pricing and service levels set out in the Schedules to the NIPA. Chorus says no terms of the Reference Offer or WSA were suggested to be “continued in force” by virtue of cl 9(5). This shows that the parties to the UFB contracts have always understood that the Reference Offer does not form part of the UFB contracts.
Interrelationship of the relevant documents; incorporation by reference
[118] The respondents say that the NIPA, Reference Offer and WSA comprise a “contractual suite” or mosaic of documents, governing the terms on which Chorus has
Consistency of language
[245] Chorus submitted that “service description” and “conditions” should be interpreted in light of their use in Part 2 of the Act to refer to high level descriptions and conditions of the service rather than a full prescription.
48 Legislation Act 2019, ss 64-66 and sch 2.
[246] I do not think the parallel drawn by Chorus between the language of ss 227 and 228 and the language of Part 2 and sch 1 of the Act, which establish the regime for regulation of copper services, is of assistance. As the Commission notes, Part 2 and sch 1 of the Act refer to a high-level description of the service only rather than detailed prescription and must be understood in context. The Part 2 regime provided for a service to be regulated in two steps: first, a high-level description of the service would be added to sch 1 and, second, the Commission could issue standard terms determinations that specified “the terms on which the service must be supplied”.49 By itself, the high-level description in sch 1 would not achieve the statutory purpose because it would require access seekers to negotiate detailed terms with Chorus and thus expose them to the risk of Chorus taking advantage of its market power. The Commission says it is not safe to draw any inference from any superficial similarity of terms between sch 1 and ss 227 and 228. I accept that is so.
Findings in relation to the causes of action pleaded by Chorus
[247] Under the first cause of action (error of law in the Minister’s recommendation) the three errors of law effectively became two, as the case proceeded. First, that the Minister wrongly interpreted the phrase “materially different”. I have concluded at
[237] above that there was an error of law in interpreting the phrase “materially different” and that the Regulations include a description of the service that is, or conditions of the service that are, “materially different from the terms set out in a UFB contract”.
[248] The other error of law pleaded by Chorus was that the Minister mistakenly thought that the first regulations were required to prescribe a complete set of terms for the anchor services and DFAS in order to provide a “fall-back” or “backstop” to a negotiation of commercial terms for those services. I have concluded that this is a significant gloss on the statutory purpose provision and therefore was an error of law.
[249] Under the second cause of action I have concluded that the Minister wrongly interpreted the term “UFB contract” in that he concluded that documents comprising the WSA were incorporated into it; wrongly interpreted the term “materially different”
49 Act, ss 20 and 30.
to mean “inconsistent with” and did not properly direct himself as to the implications of the Legislation Act which provides that the effect of incorporating the WSA and other documents by reference is to “freeze” those documents, absent amendment of the Regulations. I therefore find that the Regulations are inconsistent with the objects and intention of the empowering provisions.
Relief
[250] Chorus has sought a declaration that the Regulations are unlawful and orders quashing the Regulations and directing the respondents to reconsider the first Regulations.
[251] There is a strong presumption that relief should be granted to a successful applicant in a judicial review case.50
[252] However, notwithstanding the strong cautions against exercising the discretion not to set aside an unlawful decision, as the Court of Appeal noted in Unison Networks Limited v Commerce Commission,51 that relief remains discretionary. The Court of Appeal cites the authors of English Public Law:52
Although it is unusual to do so, the court may decide to refuse remedies… possibly allowing invalid public action to stand, because countervailing public considerations justify withholding relief.
[253] As the Court of Appeal in Unison went on to note, reasons identified as warranting refusal to grant relief include the implications of granting remedies for third parties and public administration.
[254] It is clear that the relief sought would have some utility for Chorus. But the respondents say that if the Regulations were quashed, that would have such an adverse effect on the commercial community that relief should not be granted. Alternatively, any offending aspects of the Regulations could be severed.
50 Air Nelson Limited v Minister of Transport [2008] NZCA 26 at [60]-[61].
51 Unison Networks Limited v Commerce Commission Court of Appeal, CA 284/05, 19 December 2006, at [82]-[85].
52 David Feldman (ed) English Public Law (Oxford University Press, Oxford, 2004), at 18.52.
[255] While no doubt legitimately held, the views that have been expressed as to the possible consequences on Chorus’ market behaviour of setting aside the Regulations necessarily remain speculative. As I have discussed above, the possible disruption to the industry and to consumers, contended for by the respondents and Spark, in particular, is not clear. In addition, the Commission’s concerns appear, at least in part, to have been predicated on the view that Chorus was seeking to have the Court constrain the breadth of the empowering provisions (ss 227 and 228). As is clear from the discussion above, that is not the case and this judgment focusses only on the terms of the Constraint clause.
[256] In response to Vector’s concerns, PONFAS is not currently a declared service and regulation of PONFAS is not at issue in this proceeding.
[257] What is not clear from the parties’ submissions is whether and to what extent it is realistic and practical to order that the offending aspects of the Regulations be severed, or whether the Regulations as a whole should be quashed. The relevant test is whether, after severance, the substance of what remains is essentially unchanged in its legislative purpose, operation and effect, from what was originally enacted.53
[258] I appreciate the undesirability of making orders as to the validity of the Regulations at this stage of the year, immediately before the Christmas vacation, with the risk of inadvertently creating a lacuna in the regulatory regime. The orders below attempt to meet that risk.
Orders
[259]Accordingly, I make the following orders:
(a)I declare that the Regulations are unlawful to the extent that they incorporate terms of the WSA, Reference Offer, technical standards and the Commerce Commission’s Points of Interconnection Determination, made under s 231 of the Act.
53 See, for example, Transport Ministry v Alexander [1978] 1 NZLR 306 (CA), at 311-312; R v Chapman CA 241/02, 4 November 2002 at [26], adopting Director of Public Prosecutions v Hutchinson [1990] 2 AC 783.
(b)I direct the parties to file submissions on whether and how those parts of the Regulations which I have found to be unlawful can be severed from the Regulations. Submissions are to be filed by 5.00 pm, 17 February 2023. Counsel should indicate whether they think an oral hearing is required.
(c)I direct that the Regulations remain in force pending final orders.
(d)Leave is reserved for the parties and the Commission to seek any ancillary orders or points of clarification in the intervening period.
Costs
[260] The question of costs is deferred until after submissions on possible severance have been received and considered and orders finalised.
Gwyn J
Solicitors:
Chapman Tripp, Wellington Crown Law, Wellington Russell McVeagh, Auckland
Copy to:
Commerce Commission, Wellington Spark New Zealand Limited
Vector Limited
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