TelstraClear wins Telecom wholesale deal

By PETER GRIFFIN

TelstraClear has won a healthy regulatory concession after the Commerce Commission yesterday cleared the way for a 16 per cent discount on services wholesaled from rival Telecom.

The ruling finally enables TelstraClear to offer a high-speed internet service in the Auckland residential market.

But it came with a few caveats that temper the victory.

TelstraClear can take advantage of the discounts in the lucrative business data market only when serving customers at least 200m beyond the edge of its network.

The commission seems to have designed the provision to retain some incentive for TelstraClear to keep building its network and to avoid other competitors missing out.

The limit shrinks to 100m for the less competitive residential broadband market.

But TelstraClear said it created a "no man's land" that would leave thousands of businesses and residential customers without choice.

Industry observers agree the discount is unlikely to deliver a lucrative return for TelstraClear, which has lost hundreds of millions of dollars in its New Zealand venture.

But it will allow TelstraClear to fill holes in its service, selling Telecom services where it has no network itself - in much of the country.

Macquarie Equities analyst Steve Hodgson said Telecom would lose some market share to TelstraClear as it took up the discounts.

The question was how much.

"My understanding is that the 16 per cent is not that much different from where [Telecom's] best customers are at the moment anyway.

"It improves the economics of [TelstraClear's] business at the margin, but it won't dramatically change the competitive structure."

TelstraClear wins the right to resell 98 Telecom services at the 16 per cent discount level.

Services range from business line rental, local calling, fixed-to-mobile services, directory assistance and voice messaging to business and residential high-speed internet access access and data services outside major centres.

TelstraClear had asked for 308 services to be regulated but reduced the number to 158.

The commission found that Telecom faced limited competition in many parts of the industry, particularly in "non-metropolitan" areas where its competitors had limited network reach.

TelstraClear's chief executive, Rosemary Howard, gave no details on whether the discounts would translate into price cuts, but said TelstraClear would introduce new services incorporating elements from Telecom, including a competitor to Telecom's Jetstream internet product in Auckland's suburbs.

"They will be different brands, different prices, different bundles," she said.

"Our aim was to get to the Auckland residential market."

Competition was deemed vigorous enough in services such as metropolitan data and broadband services, toll-free business, national and international calling and operator services to allow them to be excluded from the ruling.

In some areas, the commission pointed out, TelstraClear and other smaller competitors were making serious inroads against Telecom.

Sydney telecoms commentator Paul Budde said the real test of the decision would be how aggressively TelstraClear picked up market share.

"The question now is how serious are they? It's time for them to go out and invest their money in providing the services, but we know TelstraClear is under pressure to not spend money," he said.

Telecom is understood to be willing to offer other competitors deals on the wholesale terms won by TelstraClear, removing the need for them to go to the Commerce Commission.