Rivals scoff at Telecom 'posturing'

By PETER GRIFFIN

Telecom's rivals have scoffed at the telco's claim that it loses $425 million a year servicing unprofitable customers, but are nervously assessing the damage should the Commerce Commission settle on a similar figure.

Telecom has to deliver a revised estimate of its telecommunications service obligations (TSOs) to the commission next month based on a differing methodology.

The commission will take that figure into account in reaching its own TSO cost estimate, which will be split among a handful of players based on market share. They will be expected to stump up with their contribution next year. The individual amounts will be backdated to the inception of the Telecommunications Act, passed in December.

Cecil Alexander, director of toll-call operator WorldxChange, said Telecom's estimate would cripple his company.

"Clearly, the numbers nominated by Telecom are effectively rubbish and it's a posturing exercise," Alexander said. "But we're concerned at the potential material impact on our overall business when you consider that some of the figures being bandied around are similar to our entire revenue per annum."

TelstraClear's industry and regulatory affairs manager, Grant Forsyth, said yesterday that if the commission passed down such a figure TelstraClear would consider turning its back on hundreds of millions of dollars of investment and retreating across the Tasman. Telecom's estimate would face TelstraClear with a bill of about $46 million.

Vodafone's carrier relations manager, Francois Zegers, was more cautious but admitted that a TSO cost in line with Telecom's number-crunching would be disastrous for the industry. He estimated Vodafone's share of the market at 8 per cent - implying a TSO cost of about $20 million.

Telecommunications Users Group chief executive Ernie Newman said the squabbling over Telecom's TSO cost estimate was irrelevant because the commission would make up its own mind.

"For years Telecom has been asserting that its Kiwi Share services are costing it amounts that decrease in credibility almost as fast as they increase in dollar value," he said.

But Telecom has indicated that the revised figure it hands to the commission next month will not be much different to the hefty sum it has already come up with.

Telecom's group general manager of government relations, Bruce Parkes, said a reduction of the TSO estimate of just 5 per cent was expected.

He said the more than doubling in Telecom's TSO cost estimate was mainly due to a huge increase in free calls to the internet and the capital cost of reaching outlying customers, but he did not want to speculate on whether another large jump in TSO costs could be expected next year.

The smaller carriers - WorldxChange, CallPlus, Compass Communications, Global One and Team Talk - are facing the greatest uncertainty over the TSO.

WorldxChange's Alexander said it was difficult to make capital expenditure decisions for next year with the issue unresolved.

"We've got a regulator that thinks we can all plan our businesses based on what they may or may not do in six months time."

In submissions to the Commerce Commission, WorldxChange has also said that internet providers, whose customers consume vast numbers of "internet minutes", should pay their share of the costs.

"The internet companies, Telecom's Xtra being the largest, do not have to contribute or be considered for levy on the TSO," said Alexander.

Parkes said Xtra controlled only about 50 per cent of the internet provider market so a move to spread the cost among ISPs would be supported.

Commerce Commission spokeswoman Jackie Maitland said the methodology for calculating the TSO was not finalised. Another document was due to be released at the end of the week outlining which carrier revenues were to be included in TSO estimates.