Broadband war set to hot up even further

The broadband war begins in earnest today as ihug and CallPlus are expected to reject Telecom's latest wholesale offer and file a request with the Commerce Commission for better terms, an industry source says.

It is understood that Telecom had until close of business yesterday to agree to the internet service providers' proposed terms, says the source, who asked not to be named.

Telecom would neither confirm nor deny that an ultimatum had been issued, or whether it had accepted or rejected the ISPs' terms.

"We don't comment on speculation on commercial negotiations," said Telecom spokeswoman Sarah Berry. "We have got several ISPs signed up. If they are taking that action then we're obviously disappointed. We are keen to still keep talking to them."

Ihug and CallPlus, the nation's number two and three resellers of Telecom's broadband services, also declined to comment.

Although the exact terms that Telecom has been offering ihug and CallPlus are not known, they are understood to be similar to the company's recently announced retail plans.

Telecom announced a few weeks ago its retail offerings would add a new top download speed of 3.5 megabits per second, as well as a new upload speed of 512 kilobits.

The new plans also include download restrictions ranging from 200 megabytes to 40 gigabytes. The retail prices will range from $29.95 a month to $149.95, and will be available as of early April. Telecom has not yet specified an exact date.

Ihug and CallPlus have previously expressed dissatisfaction with the speeds, wholesale prices and data restrictions being offered.

The ISPs have also said Telecom refuses to specify minimum speeds on the plans, which means that at peak times users could find their services throttled down to slower than dial-up.

It was understood the ISPs had their application drafted and that it would be lodged with the commission today, unless Telecom agreed to the terms last night - a scenario that seemed unlikely, the source said.

The application will apparently seek the same terms granted to TelstraClear, the nation's number two broadband provider, by the commission in December.

TelstraClear was given unconstrained access to Telecom's broadband service, which would have resulted in speeds of up to 7.6 megabits at a wholesale price of $27.87 per user.

Telecom threatened a legal challenge to the commission's ruling and, rather than risk a battle, TelstraClear agreed to inferior services - including a 3.5 megabit download speed - in January.

The ruling was only applicable to TelstraClear, but it was expected to be quickly rolled over to other ISPs as it set a precedent.