Traditional toll-call system years from replacement

By RICHARD PAMATATAU

Telecom plans to milk its NEC switches until at least 2007 when its five-year, next-generation network replacement begins in the main centres.

The project is expected to be completed in 2012.

Steve Fuller, general manager network delivery, said the changeover was part of a 10-year plan. The company refused to say if the move to an advanced network would mean abandoning toll calls based on long-used geographic sectors or regions.

The system means that in some parts of the country, a local call can be to a number further away than to a number called at toll rates.

The NEC switches have been the backbone of Telecom's network for almost a quarter of a century but cannot offer customers next-generation services or products that are based on higher capacity lines and internet protocol (IP).

Telecom spokesman Phil Love said toll and mobile calls were not costed - "they are priced".

Using the cinema as an example, he said it did not cost 40 per cent less to show a film to a child.

Love said it was common for businesses with significant fixed costs - such as hotels, airlines and power generators - to adopt differentiated rather than uniform pricing.

Telecommunications companies made money on some calls but broke even on others. A cost-plus formula would mean cheaper calls in cities and higher prices in rural areas.

Malcolm Dick, director of CallPlus, said Telecom had written in its submissions to the Telecommunications Commissioner that it was obliged by its shareholders to charge as much as possible.

"I think from an economic point of view this is absolutely correct - you can't expect offshore institutional investors to have a social conscience about the effects of pricing on the New Zealand population, and it's not really fair to expect this."

He said the justification for regional charging was largely historical.

"The commissioner and their economists point out in some of their determinations that once you have built the network, there is really no cost per call or it is a tiny fraction of a cent per minute.

"Therefore the monopoly network operator can really charge what they want to get the highest yield."

He said that in terms of interconnection with other carriers, Telecom fixed a rate within local-calling areas. Auckland, Pukekohe, Great Barrier Island, Hibiscus Coast and Helensville were one group, and the cost to CallPlus or TelstraClear for any calls between any of these places was 1.13c a minute.

Some carriers, such as CallPlus, had taken advantage of this obvious anomaly by providing lower rates between these centres, said Dick.

"I can't imagine how a call from Great Barrier to Pukekohe has the same cost as a call from Whangaparaoa to Milford."