Phone firms slap brakes on cheaper, faster internet

Internet users have lost out as a deal between TelstraClear and Telecom has put a stop to a Government-mandated ruling demanding faster and cheaper access.

The two companies yesterday announced a deal in which Telecom will sell two high-speed internet services - one at 256 kilobits a second, or five times faster than dial-up, and another at 3584 kilobits - to TelstraClear for $26 and $30 respectively. The retail rate would be higher.

While those services are faster and cheaper than current offerings, they are slower and more expensive than those prescribed in a Commerce Commission ruling last month. The commission ordered Telecom to offer speeds up to 7600 kilobits at $27.87 wholesale. Telecom threatened to challenge the ruling. TelstraClear opted to accept the price and speed concessions rather than risk months of wrangling.

The Telecommunications Users Association chief executive Ernie Newman said: "We're going from a second-class service to a 2.1-class service, whereas we thought we were going somewhere near a first-class service."

Keith Davidson, executive director of Internet NZ, which oversees internet governance, was also disappointed and said the deal was "truly a case of what might have been".

"This action ... simply shows that the current market structure and the inadequate, light-handed regulatory framework applying to telecommunications leads to unsatisfactory outcomes for Kiwi consumers."