Telecom's 18c price cut not enough, say rivals

The Commerce Commission has dropped the price that Telecom can charge its rivals for access to its phone network - by 18c a month.

The commission ruled yesterday that the wholesale price Telecom charges its customers for unbundled bitstream access - which Telecom's competitors use to provide their own customers with broadband - would drop from a flat fee of $28.04 to $27.76.

Telecom's rivals say they will still lose money selling broadband at the new and slightly lower prices. The argue the prices are too high to allow them to make an adequate margin after reselling to retail customers.

Ihug regulatory manager David Diprose said the commission's price was still above Telecom's Xtra broadband retail prices and it estimated ihug would still lose $10 a customer. It showed the commission's model to determine the unbundled bit stream price was "totally flawed".

This follows Telecom's new Xtra "Go Large" retail prices released at the end of last month, ranging from $29.95 a month for 200 megabytes of data to $149.95 for 50 gigabytes.

Competitors who use Telecom's network - ihug, Callplus and Orcon - had said the margin between Telecom's unbundled bit stream wholesale price and prices they would have to charge their own retail customers to remain competitive with Telecom was too small.

The commission's method was "totally irrelevant" because it did not take into account the changes to the scope of the broadband product including faster speeds and larger data caps and how that impacted on Telecom's competitors, said Diprose.

CallPlus chief executive Martin Wylie was waiting for the outcome of the appeal CallPlus, ihug and Orcon lodged in the High Court seeking a lower charge. The ruling is expected in December.