Telecom moves to head off complaint

Simon Moutter

Telecom is offering internet service providers better wholesale broadband terms in an apparent effort to head off an appeal by rivals to the Commerce Commission.

A number of ISPs had been discussing applying to the commission for a ruling that would grant "naked DSL", or the separation of broadband from the home phone line, said an industry source, who asked not to be named.

"Telecom is really afraid of naked DSL," the source said.

Now reliable and inexpensive calling services such as Skype are available over the internet, fixed home phone lines - the company's bread and butter - are becoming less necessary.

If granted, naked DSL could act as a phone replacement and pose a serious threat to Telecom's revenue, 23 per cent of which came from home lines and calling in the year ended June, 2005.

It is understood the unbundled bitstream service terms Telecom is offering to ISPs are similar to those TelstraClear agreed to last month. They would include a download speed of 3.5 megabits per second for $30 wholesale, an improvement from the 2 megabit top speed now available.

But the offer also includes a higher-end product with an upload speed of 512 kilobits per second, an improvement over the present 128-kilobit maximum that TelstraClear is getting.

Telecom spokesman John Goulter confirmed the company was in negotiations with ISPs, but he would not comment on specifics.

If a company enters into a commercial agreement with another company, it is precluded from seeking better terms on that deal through the commission for the duration of the contract.

Telecom's upload speed, which affects everything from updating websites to playing video games online, has drawn considerable criticism. Chief operating officer Simon Moutter recently said the company had "got the message loud and clear" and would move to boost it.

It is understood the wholesale price of the service with faster upload would be in the mid-$50 range, which means the cost to customers would likely be near $70 a month.

The source said the offer was also conditional on acceptance by all three main providers - ihug, CallPlus and Orcon. TelstraClear would also automatically get any superior terms agreed to.

David Diprose, manager of regulatory affairs at ihug, confirmed the ISP had received an offer from Telecom, but declined to comment on specifics. The company is still after "unbundling", which would grant it access to Telecom's network.

"We don't think it's anywhere near good enough."

Telecommunications Users Association chief executive Ernie Newman said the offer, if it was legitimate and accepted by the ISPs, would do little to boost broadband uptake.

"That is extortionate and will hold the New Zealand economy back further."