Clear and Telecom engage in truce

By CHRIS BARTON

Clear will pay Telecom about $20 million less in traffic termination payments over the the next year than it did in 1999.

The companies struck a new "relationship package" deal yesterday.

The interconnect agreement sees Clear pay Telecom $35 million for the next 12 months as a "lump-sum payment for all traffic types" and replaces the previous per-minute payments.

Telecom access and transport general manager Richard Dammery said that the $35 million was a "pragmatic number" reflecting the level of voice and internet traffic forecast to flow between Clear's and Telecom's networks.

Under the previous agreement, struck in 1996, Telecom paid Clear about 2c a minute for traffic terminating on its network while Clear paid Telecom 3c a minute for traffic going the opposite direction.

In 1999, that resulted in Clear receiving about $18 million in termination payments while Telecom received $73 million - a net $55 million in Telecom's favour.

The imbalance in payments tilted back to Clear this year - largely through the introduction of free internet providers using Clear's network.

About 150,000 active users of Clear's zfree, i4free and freenet have created what is known as a call sink - internet calls, usually of long duration, started on Telecom's network but terminating on Clear's.

The rapid growth in this traffic meant Telecom would have to pay Clear an estimated $40 million in interconnect payments over a year.

But under the new agreement, termination payments for all traffic is effectively capped at a net of $35 million in Telecom's favour.

That has caused concern among some free internet providers which have been sharing in termination payments with Clear and may now see that revenue stream dry up.

The chief executive of i4free, Annette Presley, said: "The two major telcos have decided to deal and continue a situation that's looking more and more like a duopoly.

"They're saying for the next year the imbalance will continue."

She said that i4free would continue its court action against Telecom.

It was applying to the High Court at Wellington to join with the Commerce Commission's action against Telecom over anticompetitive behaviour.

Ms Presley hoped for redress of the imbalance in interconnect payments from the Telecommunications Inquiry, which is due to report its recommendations to the Government today.

As part of its deal, Clear also gets wholesale access to Telecom's fast internet service Jetstream, which is expected to be available under a Clear brand early next year.

Mr Dammery said that once Telecom had "beta tested" connecting Clear's network to Jetstream, wholesaling arrangements with other net providers and telcos would follow.

In its draft report the inquiry said it would recommend that wholesaling of Telecom's local loop should be "designated service."

Telecommunications Minister Paul Swain said: "The industry has been dogged by litigation and argument. It's encouraging to see commercial arrangements by two of the largest players.

"Clear has indicated the inquiry may have helped that process.

"If that's the case, then it will have achieved some of its purpose before the formal recommendations have been made."

Other aspects of the Clear and Telecom "clean slate" deal include:

Settlement of all litigation between Clear and Telecom, including Commerce Act and 0867 proceedings.

Charges at an agreed rate for 1828 million minutes of toll calls and 49 million minutes of mobile calls by Clear customers.