Go-ahead for Telecom on internet access

By Richard Braddell

WELLINGTON - The Government says it has sidestepped the prospect of protracted litigation by agreeing terms under which Telecom can go ahead with its new 0867 access code for local internet connections.

The agreement clears the way for Telecom, from November 1, to charge internet users on local dial-ups 2c a minute after the first 10 hours each month unless they transfer to the 0867 access code which will be free of charge.

The agreement, which is contained in letters between Telecom and the Government, was arrived at after conflicting legal opinions produced by Telecom which said its plans conform with the Kiwi share's stipulation of free local calling and from the Crown Law Office which said they could be in breach.

The only option to the agreement was to engage in lengthy litigation with an uncertain outcome, the Communications Minister, Maurice Williamson, said.

However, the agreement is strictly between the Government as the Kiwi shareholder and Telecom. Third parties, including other carriers, have no enforcement rights.

When first announced, Telecom's 0867 scheme was greeted with dismay by competing carriers and internet service providers who saw it as a unilateral restructuring of the internet market that could only be undertaken by a dominant player.

And the Labour party has promised to make the issue one of the first things it will look at in a wide-ranging inquiry into telecommunications if it becomes government.

However, Telecom has moved to soften opposition by paying the sometimes not inconsiderable costs for internet service providers to move customers to the new access code.

Clear Communications, however, is a continuing critic, not least because it stands to lose millions of dollars in interconnection revenue from internet calls delivered to its network because the new access code is supposedly not part of the interconnection agreement.

In an incentive to keep customers using existing access arrangements, Clear has offered to reimburse its customers the 2c a minute that will be charged by Telecom.

Saturn Communications, which has yet to respond to the issue, says it is more concerned with the contractual impact on its interconnection agreement with Telecom rather than longer-term policy implications.

Saturn's chief executive, Jack Matthews, said internet calls should be outside interconnection agreements since they were "just a way to arbitrage the system."

Having said that, the interconnection agreements were structured by Telecom and companies like Saturn had built their businesses accordingly.

Communications Minister Maurice Williamson said yesterday that the Government was satisfied with Telecom's assurances that the policy objectives of the Kiwi share would be met.

But asked if the Government and Ministry of Commerce officials had considered the issue in terms of the overall competition framework as opposed to the Kiwi share, Mr Williamson said: "The answer to that would be no."

As minister there were two things he wanted: the continuation of free access to the internet by residential customers and quality of service that would be at least comparable to that on present voice circuits.

Although the 0867 access code is a national number, the guarantee of free connection applies only to internet service providers in the local calling area.

Telecom is also to monitor service standards and these will be published along with existing service quality disclosures.