High-speed broadband costing us, say ISPs

Telecom's rivals have launched faster broadband plans in response to Telecom's switching its broadband network to unconstrained speeds, but complain they will lose up to $17 a customer every month.

On Wednesday Telecom switched its internet network to "un-constrained"- the maximum speeds possible for Telecom's broadband ADSL technology.

This was quickly followed by Ihug, Orcon and Slingshot's separate launches of plans promoted as faster and cheaper broadband.

But the ISPs complain that if they want to move a customer from a plan offering, say, 256 kilobits a second to unconstrained speeds, they would have to pay Telecom more for the service.

However, it costs nothing for Telecom to move all its Xtra broadband customers to unconstrained speeds and it has not increased charges to its retail customers.

As a result of the "price squeeze", the ISPs said they would lose $6 to $17 a customer per month, according to a study by John de Ridder, an Australian telecommunications economist and former Telstra employee.

"As ISPs we have no option but to compete with Xtra," said Seeby Woodhouse, chief executive of Orcon.

"If we have to lose money in the meantime until it becomes fair and equal, then we have no choice. We are hoping for some action and that's why we applied to the Commerce Commission for the urgent relief."

A joint statement by the ISPs said they had applied to the commission for a "cease and desist order" to force Telecom "to negotiate a fair price for the new product", but there has been no action from the commission yet.

"While the commission is considering the complaint and may well investigate, it will be too late."

Telecom has said it decided to bring back unconstrained speeds because customers were increasingly using the internet to download larger files, such as videos, music, games and other interactive services.

This month the commission dropped the price that Telecom can charge its rivals for access to its wholesale unbundled bitstream service - or unconstrained broadband - by 28c a month to $27.76 a month.

When Telecom's competitors claimed that they were suffering a price squeeze, Telecom said "the room to make a profit margin is not at the entry level plans but at the higher-priced, higher-specification plan".

A Telecom spokesman said: "Because the commission consciously set an average price knowing some services would be priced above and below, inevitably there is more margin at the top end products."

Commenting after the release of the new plans last week, Slingshot marketing manager Mark Callander said other internet providers were "blatantly misleading" their customers by promoting $29.95 full-speed broadband plans which had low data caps.

"What customers may be blindly unaware of is that the data limits on these plans can be chewed up within the first five minutes of the month - and this could leave them with monthly bills in the thousands."

Internet New Zealand spokesman Richard Wood said that people should be careful to check the speeds and data limits of all the plans before purchasing plans or switching providers.