TelstraClear wins access to broadband

Telecom has been rebuffed by a strong Commerce Commission ruling granting TelstraClear resale rights to five of its business broadband services - including one not initially asked for.

The commission's final determination, issued yesterday, found Telecom was facing limited national competition in providing high-speed internet data services to businesses. The ruling will require Telecom to resell its office networking, remote connection, messaging and directory services to TelstraClear, which will in turn sell them to business customers.

The ruling will also require Telecom to resell its One Office suite of services, a point of contention between the two companies. When TelstraClear initially lodged its application in November 2004, it was seeking access to a service called Private Office. During the past year, Telecom introduced another service - One Office - then argued that it was significantly different from Private Office and should not be included in the regulation.

In the final ruling, the commission said One Office was similar enough to be included.

Bruce Parkes, Telecom's manager of regulatory affairs, was disappointed.

"We don't really feel we've had our day in court, so to speak," he said. "We do find the process unsatisfactory. If [the commission] had heard all the evidence, they may have reached a different conclusion."

Grant Forsyth, TelstraClear's manager of regulatory affairs, said the ruling was a sign of the regulatory tide shifting against Telecom.

"It signals that the Commerce Commission is pushing back a lot harder on Telecom to ensure it meets its obligations to wholesale beyond the simple black letter of the law," he said. "There are aspects of this which we hope are an indicator of an improving regulatory wholesale regime."

The ruling will force Telecom to offer the services to TelstraClear at a "retail-minus" discount of 16 per cent. TelstraClear will therefore be responsible for all sales and billing costs, which means its profit margin from the services will be negligible.

Forsyth said the win was important not because the services would generate big revenue on their own, but because TelstraClear would now be able to offer cost-effective broadband products where it did not have its own network.

"It's been a thorn in our side because when we go to compete with Telecom for business customers ... we find ourselves at a significant disadvantage where those customers have offices outside of our own network," he said. "Now we will be able to compete on a much more realistic level with Telecom" by offering a total service package.

He said that competition would ultimately drive prices down.

Telecom recently dropped its application for clearance to buy wireless internet spectrum from Counties Power. It had initially sought permission from the commission to make the purchase, but then decided it didn't need the approval and went ahead with the deal. The commission is now investigating whether the purchase will lead to a reduction of competition.

Telecom shares closed at a new 52-week low yesterday, falling 2c to finish at $5.58 each.

SERVICE RIGHTS

* The Commerce Commission has given TelstraClear rights to resell Telecom's high-speed internet services to businesses.

* TelstraClear says it will now be able to properly compete with Telecom and prices for business customers will drop.

* Telecom objects to the inclusion in the ruling of its One Office service, which was not in the draft decision.

* Inclusion of that service may be a signal that the commission is getting tough on the company.