KEY POINTS:
The Commerce Commission is proposing changing the way Telecom calculates the amount it charges internet broadband rivals for its wholesale bitstream service.
In June last year the commission issued a decision, implemented in October, on the issue of bitstream, which is a circuit provided by Telecom to an end-user's premises.
The service is used by competing providers to deliver retail broadband services.
In late-October Telecom changed its retail broadband plans, including the introduction of its Go Large plan which had an unlimited data cap.
All plans also no longer had downstream speed restrictions and were offered at the maximum connection speed a customer's line allowed.
In December competitors ihug and CallPlus asked the commission to reconsider its wholesale bitstream service price decision.
Ihug said changes in the market since the decision meant no equally efficient operator could compete with Telecom to provide retail broadband services.
In a draft reconsideration released today the commission said it had decided to amend the pricing terms of the decision in light of the major changes in Telecom's retail broadband plans.
The pricing methodology in the decision had included a weighted average retail price (Warp) mechanism to ensure that changes in retail prices would flow through into changes in the wholesale price, the commission said.
The aim was to have the margin continue to reflect downstream costs.
But, in its current form, the Warp did not capture any changes made to other non-price attributes of Telecom's retail plans, including increases in data caps or the introduction of new plans with unlimited data caps.
Telecom's October change to the role of data caps was not reflected in quarterly Warp adjustments, the commission said.
As a consequence the bitstream access price calculation was no longer capable of reflecting an efficient wholesale price.
The proposed changes to the bitstream pricing methodology would change both the initial price determined in the original decision, and subsequent quarterly price adjustments.
That would change the wholesale prices payable to Telecom for the bitstream service, the commission said.
The commission has called for submissions on today's draft reconsideration, and intended to release a final decision this year.
It is still investigating complaints in relation to the advertising of broadband speeds, and complaints that Telecom used its market power to introduce a retail bundle of broadband and calling services.
- NZPA
