Motive for net code disputed

By RICHARD BRADDELL

WELLINGTON - On December 15, Clear Communications wheeled out the big gun, its not-so-secret weapon, Ken Benson.

The former head of Telecom's networks, who now occupies the same position at Clear, seemed unparalleled in his ability to comment on whether Telecom's imposition of an 0867 access code to the internet was genuinely meant to manage network overloads, or whether it had a more sinister purpose.

Mr Benson's comments were interesting for two reasons: first, because he regarded Telecom's claim that it needed 0867 to manage network overloads resulting from burgeoning internet traffic as disingenuous at best. Second, because it was the first time Clear had publicly admitted that it stood to lose a lot of money from Telecom's action.

For those who have not caught up with 0867, it is a new prefix Telecom wants internet users to dial when connecting with internet service providers.

While 0867 access on local connections would remain free, internet users who declined to adopt the 0867 prefix would be forced to pay 2c a minute after every 10 hours each month of internet connection.

When announced in June, the charge was quickly dubbed "the internet tax" by its detractors, even though Telecom argued its imposition was simply an "economic incentive" to encourage people to change to a system that would improve network management.

If everyone switched over, it would indeed seem unlikely that Telecom would make much money out of the charge, particularly since it has undertaken not to charge for local 0867 calls.

But Clear, which stands to lose potentially more than $20 million a year in termination fees from Telecom's network to its internet link Clear Net, has refused to do so. To keep its Clear Net customers on board, it has decided to reimburse them the cost of the "internet tax," resulting in a good proportion of the termination revenue going back to Telecom. Few other providers can afford such largesse.

On the face of it, Telecom can make a good case for doing something to manage internet traffic. It expects its volume to overtake voice on its network next year, possibly accounting for 70 to 80 per cent in two years.

Telecom fears that when there is an outage, computers unable to make contact with a provider will start repeat or "attack dialling," and multiply by a factor of as much as 10 the load on exchanges that are reasonably designed to handle much less.

Telecom already claims that 0867 has enabled it to handle what would have been nightmarish problems arising from outages.

But as Mr Benson said: "Even if you accept that assertion, anyone who understands Telecom's network knows that there are far better ways of managing demand.

"If protecting the network was the real issue, Telecom could divert internet traffic at the local exchange and pass it via dedicated trunk lines to either the internet service provider or another carrier."

Telecom's response has been to suggest that internet traffic has doubled since Mr Benson left, and that his knowledge of 0867 was incomplete and outdated.

Meanwhile, Mr Benson launched the argument that the effect and almost certainly the strategic aim of 0867 was to sidestep interconnection payments to Clear, which had recently built up a significant wholesale internet service provider service.

Many in the industry agree. Telecom has admitted that 0867 calls still travel over the same physical infrastructure, with the exception that they are briefly diverted from the local exchange to an "intelligent network," which does the call management in the event of an outage, and back.

But while many see the strategy behind 0867 as owing much to depriving Clear of interconnection revenue, concerns are deep-rooted that it will cement a monopoly position in what is the fastest-growing area of telecommunications and a vital link to the knowledge economy.

The executive director of the Internet Society, Sue Leader, said: "Our concern is that with routing the vast majority of the residential data calls in the country via 0867, it means that you put dial-up access into a near monopoly position through Telecom."

The reason for that is that there are only two carriers other than Telecom of any significance in the residential market dealing with internet traffic - Clear and Wellington's Saturn Communications.

In undertakings agreed on with the former Communications Minister, Maurice Williamson, Telecom agreed to maintain the option of free local internet calls via 0867 in return for relief from any potential Kiwi Share obligation to provide existing internet access free of charge. But in a key proviso in the agreement, the terms of carriage of internet traffic between carriers were left subject to negotiation between the carriers.

Saturn, which had protested that the internet traffic, 0867 or otherwise, was covered by the local service interconnection agreement, settled a deal with Telecom in which it is believed 0867 and other internet traffic would be conveyed between the two networks free.

The important word is "believed" since terms of the agreement have not been made public. And although the deal signed between Saturn and Telecom looks like an interconnection agreement, it is likely that it will not be disclosed under new regulations coming into effect on January 1 because the signatories have called it something else.

Meanwhile, Clear's refusal to agree to terms on internet traffic has had implications for internet service providers using its data services. Since there is no agreement - call it interconnection, data traffic or whatever - Telecom has refused to allow 0867 traffic to providers connected through Clear datalinks to be connected, although one provider says that position has softened.

The reason being that while providers who have been forced away from Clear's network are seeking the same services from Telecom, the latter has had difficulty supplying them.

New Commerce and Communications Minister Paul Swain has promised an inquiry into the 0867 arrangements.