Clear's 2c gesture worth millions

By Richard Braddell

Between the lines

Clear's apparent generosity in stumping up the 2c a minute Telecom wants to charge its customers for local internet connections can be viewed in two ways: as a means of preserving Clear's position should the decent debate the issue deserves ever get under way, and as a way to claw back perhaps a third of the $26 million in interconnection revenue Telecom has to pay to complete local internet connections in Clear's network.

Why Clear will save money by spending money lies in simple arithmetic. Had it done nothing, all the internet revenue due from Telecom would have been lost because calls would have been transferred to the free national access code which sits outside existing interconnection agreements.

Instead, Telecom will continue paying Clear $1.05 an hour for each of the 23.5 hours on average that internet users, including the 90,000 on Clear Net, spend on the net each month. In return, Clear will pay Telecom $1.20 an hour, but only after the first 10 hours.

But Telecom has never admitted that sidestepping an inconvenient term in interconnection agreements was the reason it now wants to restructure the internet market. That may have been a happy byproduct, but Telecom's aim was to manage network traffic and preserve the integrity of emergency 111 services in a network that might otherwise become overloaded.

Thankfully, Saturn has come to Telecom's aid in Wellington by relieving Telecom's switches of a quarter of their residential load. And Saturn may yet be prepared to lend a hand in other cities.

In the meantime, questions about Telecom's action still hang round. To the Labour Opposition, the fact Telecom can unilaterally reshape the market bears investigation in itself.

For others, including the Internet Society, the issue is defined in terms of the Kiwi share which guarantees that Telecom will provide free local calling. The Minister of Finance, Sir William Birch, is responsible for the Kiwi share, and he has had Crown Law Office advice that Telecom's behaviour may be illegal.

But framing the debate in terms of the Kiwi share is to cast it too narrowly. What happens if, as is likely, voice and internet one day are carried on the same data networks? Will voice no longer be deemed to be part of the local calling option? That issue alone is worthy of debate.

Meanwhile, the Commerce Commission is looking at the competitive implications, but from within a Commerce Act that has often proved wanting and is now slated for change by both the main political parties.

Time is running out, and not just because of Telecom's November 1 implementation date. An election is of much greater moment than the complexities of the internet. And that guarantees that sorting out the internet will be all the harder next year.