Editorial: Telecom still acts like a dinosaur

Theresa Gattung had barely settled into the Telecom chief executive's chair late last year when she announced her intention of moulding a "supremely agile company." Perhaps she little realised the size of the task. On the evidence of recent events, she has inherited an organisation bearing the traits of a thick-skinned and partly blind dinosaur. Telecom's pulling of the plug on a free Internet service provider, i4free, was symptomatic not of a nimble operator but of a company unable or unwilling to respond to a changing environment.

That attitude will hardly assist Telecom's cause in the eyes of the Government inquiry into the telecommunications industry. Nor will it help that ihug, the Internet services company, has duplicated the plug-pulling ploy. The spur for the inquiry was new companies' difficulty in gaining a foothold and, therefore, providing the competition necessary to drive prices down.

Throughout the past decade, a succession of newcomers have filed court proceedings against Telecom alleging anti-competitive and discriminatory practices. These actions were always long-winded, and often, because of the Commerce Act's shortcomings, inconclusive. There was, however, no other recourse under a light-handed regime that installed Telecom as the industry's de facto regulator. If that stranglehold made Telecom high-handed, it was little wonder. And if it encouraged the company to protect its position and to milk profits - Treasury suggests that Telecom enjoys monopoly profits of $500 million a year - who could blame it?

Telecom's latest clash with a niche company trying to build a market position harks back to its aggressive imposition of an 0867 access code to the Internet. Persuading the National Government that the code was necessary to prevent Internet users clogging the telephone network was enough to swerve around the potential complication of Kiwi Share local-call obligations. It has also allowed Telecom to make hay at the expense of Clear Communications. The 0867 code deprives Clear of interconnection payments for Internet calls on its network. The cost to Clear could be as much as $20 million a year. The cost to i4free is to be embroiled in a far wider dispute.

The Government, when filling the Opposition benches, said it would urgently address the potentially anti-competitive issues raised by the 0867 access arrangement. Early moves were seen as essential to prevent Telecom cementing its position in the Internet market. "Free and open access to the Internet is dear to my heart," said Paul Swain, the Minister of Commerce and Communications. An obvious starting point was the code's relationship to the Kiwi Share. Now, however, Mr Swain is promising changes before Christmas, an indication that he will await the completion of the telecommunications inquiry.

This delay gives Telecom precious time to attempt to sheet home its advantage. Like an army aware that an armistice will soon be signed, it has gone on the offensive to ensure that it will confront the post-ceasefire environment in the strongest possible position. However, its aggression merely reinforces the need for an independent regulator, possibly in the shape of a specialist competition court.

For Telecom's rivals, and for consumers denied the benefits of a truly competitive market, that cannot come soon enough.