Telecom predatory say net providers

New Zealand's internet service providers (ISPs) have banded together to ask the Commerce Commission to investigate Telecom's wholesale internet pricing regime.

About two dozen ISPs have signed a letter to the commission that says selling Telecom's broadband is not profitable for them because Telecom offers discounts on its retail service by bundling it with other services such as tolls. Telecom also provides discounts on installation fees to retail customers, but adds charges to wholesalers, the letter says.

The ISPs who signed the letter are understood to include: Actrix, Acute Systems, BayCity, Compass/Iprolink, Globe.Net, Iconz, Igrin, Ihug, Inspire, PCNet, Plain Communications, PlaNet Communications, Quicker Net, Quicksilver, Quik Internet, Snap Internet, Tasman Solutions and Wise Net.

The commission confirmed receiving the letter and said Telecommunications Commissioner Douglas Webb would comment on it in the next few days.

Alan Marston, director of PlaNet, which signed the letter, put a draft of it on the internet last week in an effort to attract attention to the issue.

"We're doomed. It would be good if everybody knew we're doomed," he said.

Marston said every ISP in the country, with the exception of Orcon, Telecom's Xtra and TelstraClear, agreed with the complaint.

"Some are much more angry than others, but all are in agreement."

A draft, which Marston says is not much different from the final sent to the commission, says Telecom is supplying 0800 number services to Xtra at a lower price than to other ISPs.

"This is a case of predatory pricing and unfair use of a monopoly position to prevent competitors supplying internet access to users outside main centres," the draft says.

It also says Telecom's Xtra service is "anti-competitive" and "discriminatory".

Telecom said the letter was authored by smaller ISPs which were not necessarily particularly efficient.

"The bigger picture here is the extent to which the marketplace can support a large number of smaller ISPs," said Bruce Parkes, Telecom's government and industry relations manager.

"There seems to be an underpinning assumption in the letter that every ISP is entitled to be profitable, and that it's Telecom's job to ensure that they're profitable.

"The marketplace is likely to see winners emerge from ISPs, and some will fall by the wayside. I suspect the ones that are complaining are the ones that are starting to feel the pinch."

Parkes pointed out that Orcon, the country's fourth-largest ISP, did not sign. However, Ihug, the third largest, did sign.

"Once you get into regulation, you get businesses that are more and more dependent on regulation for their business case," Parkes said. "With the ISPs, they essentially rely on the Commerce Commission and regulation to create a business for them.

"All I see is Ihug and the other ISPs displaying exactly what you would expect out of a regulatory regime. It's the same around the world, it breeds a culture of complaints."