Telecom price rise blamed on internet boom

By ELEANOR BLACK and GREGG WYCHERLEY

The price of having a phone at home is about to increase by nearly 5 per cent, affecting more than a million households.

Telecom will also increase charges for off-peak toll calls, calls to mobile phones overseas and for maintaining wiring in houses.

The increases, from February 1, will bring in an extra $26 million a year for the company.

Telecom, which has a monopoly on residential phone lines in almost all parts of the country, blamed the price increases on New Zealanders using the internet too much - although its Xtra subsidiary heavily promotes internet use.

The monthly line rental will rise by $1.71 to $38.05 a month in all parts of the country except Wellington and Christchurch, where competitor TelstraClear has cut into the market by charging $29.95 a month.

In those regions, Telecom charges will rise by $1.40 a month, to $31.35.

The company points to "explosive growth" in local calling as the reason for its first rise in monthly line rental in three years.

The increase falls in line with the Kiwi Share agreement which means the company has to keep rises at or below inflation.

But Ernie Newman, chief executive of the Telecommunications Users Group, said that if Telecom was going to use the price-rise privilege given by the Government, it should provide more services.

"It's about time the Kiwi Share was dusted off and brought into the internet age," he said.

"It would be hard to think of another company or industry where there is a Government-sanctioned right to do that. It's quite a bonus."

Telecom's marketing general manager, Kevin Kenrick, said the internet was largely responsible for a surge in phone use that had prompted the price increase.

Mr Newman said the telecommunications giant should invest in speeding up internet access and allow number portability so people could change to a different provider and keep their phone number.

"New Zealand is about five years behind the rest of the world in having that facility," he said.

"The cost of running a telecommunications network around the world is plunging."

But Telecom maintains it must charge more as the country spends more time on the phone and internet.

New Zealanders spend twice as much time - more than 1200 minutes a month per household - on the phone as they did four years ago.

Mr Kenrick said residential customers in effect spend 3c a minute for national calls, compared with 5.5c four years ago.

Telecom says it loses $180 million a year on its residential service and the new prices would reduce this.

The Kiwi Share, a golden share held by the Government since Telecom was privatised in 1990, requires the company to provide a range of services, including free local calling.

Deputy Prime Minister Jim Anderton said he was concerned that a small minority of people over-using their home internet connections had contributed to the latest rental increase.

The Government had looked at ways of addressing the problem, but any solution needed to be within the obligations imposed by the Kiwi Share.

There were no plans to start charging for individual phone calls.

"The concern of the Government would be that once you start charging for computer use of phone lines it's hard to separate computer use from phone use," Mr Anderton said.

Telecom's optional wire maintenance charge is also increasing, by 29c a month to $2.24, to keep pace with an increase in the number of lines going into homes.

Off-peak national calls will cost an extra 4c a minute, pushing the price to 19c.

Capped-price calls, such as weekend and weeknight specials that allow people to talk for up to two hours for $3, are not affected.

International calls to mobile phones are also to rise. The peak rate for a call to a cellphone in Australia will go from 55c a minute to 99c.

Telecom now charges the same for all international calls, although calls to cellphones cost the company more than to landlines.

The increase is likely to include calls to New Zealand-based phones that "roam" overseas as well as foreign-based cellphones.