Market referee probes Telecom as internet rivals cry foul

By PAUL BRISLEN

The telecommunications watchdog is to run a rule over Telecom's controversial high-speed internet plans, launched last week.

Telecommunications Commissioner Douglas Webb is investigating whether Telecom has breached the Commerce Act by not offering its new retail fast-internet services as a wholesale service to internet service providers (ISPs).

"We have had complaints from ISPs about the launch of the new retail products without a wholesale equivalent and we are investigating whether those complaints lead to a breach of the Commerce Act," said Webb yesterday.

As reported in the Herald on Monday, ISPs are up in arms over Telecom launching retail services far superior to the wholesale services they will be allowed to provide.

Telecom will offer several new JetStream plans to consumers from October 23. However, the new plans will not be offered at a wholesale rate to ISPs until next year. Competitors are allowed to sell the products as a resale service, but the margin for each service is less than one dollar per customer per month.

The commissioner believes Telecom is required to offer a wholesale version of the products at the same time as it launches a retail product.

"I am concerned that the wholesale equivalents haven't been provided to competitors and that fact risks undercutting ISP competition by confining them to resale and squelching their ability to differentiate and improve," said Webb.

Telecom's general manager for Government relations, Bruce Parkes, said the company saw no Commerce Act implications from its decision.

"The intention is to expand the wholesale offer in April next year."

Telecom was introducing a new wholesale regime, managing an existing resale environment and wanted to introduce new retail products as well.

"That's a lot for any company to handle. We physically couldn't do more on the wholesale regime," Parkes said.

Telecom did not want to "sit on its hands" over introducing new retail plans while it sorted out its wholesale technical issues and, in the interim, would offer ISPs a resale service.

Webb draws the line between wholesale and reselling Telecom's retail service.

"As soon as Telecom puts the product out into the marketplace they will need to offer it to their competitors for resale except where there is a competitor network in Wellington and Christchurch."

He said the resale model had been offered by Telecom and competitors would be able to on-sell the products.

"So to that extent there will be competition in terms of delivery channels but there won't be competition in terms of differentiation."

Webb said in an ideal world Telecom would be technically able to offer the wholesale service.

"We're continuing to quiz them about the problem and how it's going to be fixed."

But Webb reiterated his support for the new plans.

"That Telecom is getting higher speed JetStream products out into the market is an important step and will definitely accelerate uptake. That's unequivocally a good thing."

The service on offer

* Telecom wholesale service: 256 kbps download speed.

* Telecom's retail service: speeds of up to 2000 kbps.

* Telecom's retail service is not available under the wholesale regime.

* Telecom's wholesale regime has been delayed by a technical glitch.

* Telecommunications Commissioner is considering the legal position.