Telecom worried, TelstraClear applauds interconnection price

By NZPA

Tuesday 5th November 2002

Incumbent telco Telecom said it was concerned that today's decision from the Commerce Commission on interconnection prices could act as a disincentive to invest in New Zealand's telecommunications infrastructure.

Telecommunications Commissioner Douglas Webb ruled today on the longstanding issue between Telecom and TelstraClear, setting a price of 1.13c per minute. Its most significant impact is expected to be on the cost of toll calls.

Telecom charges 2.6c per minute to other carriers who want to transfer calls to its network, but the commissioner's draft determination suggested prices should be virtually half that, between 1.21c and 1.42c per minute.

TelstraClear claimed a fairer range was between 0.14c to 1.4c.

All of the price ranges were based on the price of interconnection in overseas countries.

"Naturally we are very concerned that the determination comes under the draft range the commission had earlier indicated," Telecom's chief operating officer for New Zealand, Simon Moutter, said today.

He did not say whether the company would appeal the price.

"We will have to examine this interconnection figure to see what the decision will mean and how we will deal with it.

Mr Moutter said the commission appeared to have not given enough weight to the need for investment in future technology needs. "We are New Zealand's biggest private infrastructure investor and this year alone had planned to invest more than $400 million in our New Zealand infrastructure.

"We want to sustain that level of investment in the infrastructure that supports the knowledge economy." However, Mr Webb told media today that the figure was revised downwards because of changes in the exchange rate and in some of the countries which the commission used to base its price on.

He said incentives for future investment by either company had been factored in, adding the median price of the overseas countries had been 0.66c per minute.

"The final price of 1.13c clusters New Zealand with Australia and the United Kingdom. It is above the United States and Canada and below Ireland and the continental European prices."

The ruling was welcomed by TelstraClear, the country's second biggest telco, which in various forms has battled Telecom's interconnection fees for years.

TelstraClear chief executive Rosemary Howard said it was encouraging that the commissioner's first decision "highlights the exorbitant prices demanded by Telecom for more than a decade". Mrs Howard said today's decision set the scene for a more competitive industry.

"It provides certainty which will enable more vigorous competition which can only benefit customers."

Mr Webb said he could not say for sure whether consumers could expect the cost of toll call to fall, but expected competition and consumer choice to take their course.

Today's decision lasts for a year and also sets out certain non-price terms for calls. Internet and local calls were not involved as the two companies agreed in September not to charge each other for those types of calls.

Telecom's share price was down 42c to $4.80c although analysts said that was mostly due to a first quarter forecast from the company that was lower than expectations.

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