Telecom commissioner hands down pricing decision

By NZPA

Monday 2nd September 2002

A long-awaited draft ruling on pricing in the telecommunications industry has recommended Telecom charge its rivals a lower price for connecting some calls from its fixed network.

The Commerce Commission ruling is meant to resolve the decade-long dispute between Telecom and rival TelstraClear.

TelstraClear has maintained Telecom has a monopoly and w anted local prices to be brought into line with international benchmarks. It was seeking a price in the range of 0.14c to 1.4c a minute, which was the range companies like Tel ecom charged in other countries, as shown in a report by consultants CostQuest.

CostQuest found Telecom's current charge of 2.6c a minute was nearly double the highest price among six comparative countries -- Finland, United States, Britain, Norway, Ireland and Australia.

But Telecom said its price was based on international benchmarking of another kind.

Today the Telecommunications Commission, headed by commissioner Doug Webb, recommended that toll bypass, toll-free and voice calls be charged according to international benchmarking.

It still has to determine the exact price but indicated a range of 1.21c to 1.42c per minute.

Toll-free and bypass calls make up a large percentage of the business calls handled by TelstraClear, a commission spokesperson said.

However, for data/Internet calls, the commission recommended a "bill and keep" model, in which carriers absorb the cost of calls to Internet service providers (ISPs).

That issue has been relevant to TelstraClear, which has attracted a large number of ISPs and, under a previous arrangement, would charge Telecom for terminating the call.

Capping the price for voice and data calls is also discussed in the report. Voice calls are generally shorter than data calls.

TelstraClear's initial reaction today was that while 1.4c was still at the higher end of the lower range, it was better than the current price.

Telecom hailed today's ruling as a good starting point and "a move towards greater certainty" on longstanding issues.

"Naturally there are parts of the determination that we disagree with but there are others which we think are sensible," Telecom's government and industry relations general manager Bruce Parkes said.

"The decision on bill and keep for local data calls is sensible. And for the future, especially with the move to an IP (Internet Protocol) network, local data calls are the significant part of the equation."

IP is the phrase used to describe Telecom's upgrade of its data network.

Mr Parkes said Telecom was also pleased the commission had suggested that a lot of issues -- including route splitting and international best practice -- be referred to the telecommunication industry's forum. "We believe that's a good place for them." He stressed that Telecom was still in negotiation with TelstraClear over a range of issues including wholesale prices and other matters including the draft determination.

"...the commission itself is still asking some fundamental questions which we and the rest of the industry will have a chance to address as the determination goes through the process laid out in the (Telecommunications) Act."

The commission has also released its final study on international benchmarking. It will hold a conference with Telecom and TelstraClear before a final determination, probably in October.

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