NZ consumers wait to see if carriers pass on cheaper toll calls

By NZPA

Tuesday 5th November 2002

Toll call prices could fall following the Telecommunications Commissioner's decision on the cost of interconnection between TelstraClear and Telecom's networks.

Interconnection, the fee which one carrier charges another for completing a call, has been a bone of contention for years between the two companies.

But today the commissioner, Douglas Webb, ruled that the price should be 1.13c per minute -- less than half what Telecom is presently charging and at the higher end of what TelstraClear was seeking.

The price will affect local tolls, pay phone and toll free calls. It does not cover mobile calls. Terms for Internet or local calls were settled in September when the two companies decided not to charge each other for those calls.

Although today's decision does not apply to other companies, Mr Webb said other carriers might well look to the TelstraClear price when seeking a new access contract with Telecom.

And while he would not say directly what he expected from the companies, Mr Webb did expect competition to kick in.

"This is certainly a significant prices change at the access level. ...In the normal course, competitors would be expected to react to changes in the underlying costs."

TelstraClear welcomed the decision, estimating that it and its predecessors had "overpaid" Telecom $100 million over the last 10 years.

Given that the ruling was backdated to June 1, TelstraClear estimated that Telecom "owed it" a net $14 million in the last five months alone.

TelstraClear chief executive Rosemary Howard said the ruling proved Telecom's prices had been "exorbitant".

But Mr Webb said Telecom's pricing had come out of "different conditions and times".

"Clearly Telecom was in a position to be very determinate about what the price should be in the market. It was offering the service and there was very little alternative to that service, and in that type of environment, prices tend to deviate from costs."

Asked whether TelstraClear would lead the charge by lowering its toll call prices to consumers, Mrs Howard said it would certainly make the company more efficient as a competitor.

Telecom, which doesn't charge itself interconnection fees, said it would await TelstraClear's response with interest.

"We'll always be competitive in the market," said Telecom's chief operating officer in New Zealand, Simon Moutter.

Mr Moutter said interconnection had previously brought in about $10-12 million a year, a relatively small part of its revenue, but it "still hurt" and sent a worrying signal to companies like Telecom which invested in infrastructure.

"Ten million dollars a year of revenue can sustain a sizeable chunk of core network investment...And it's only the first leg in a regulatory trifecta because we still have wholesale and the TSO cost issues to come.

"We won't make any decisions around how it affects our investment position until we have the outcomes of all three of the legs of that trifecta."

Mr Webb said future infrastructure costs were factored in to the revised price, which looked at 17 comparable countries or states for guidance. The median international price was 0.66c.

Today's ruling lasts for 12 months, and Mr Webb expressed the hope the two parties might be able to come to a private arrangement in future. Neither party has decided yet whether it will appeal.

While interconnection was the first decision by the recently formed Telecommunications Commission, it is far from the last. It is still due to deliver a ruling for TelstraClear on Telecom's wholesale prices, which Mr Webb said could be expected in draft form in the next few weeks.

However, it is likely to be early next year before a draft ruling is released on the much wider industry issue of the "Kiwishare" agreement -- the cost which Telecom currently bears alone for maintaining the existing fixed line network.

Known officially as the Telecommunications Service Obligations agreement or TSO, the issue was so complex that it was taking longer than the timetable under the Telecommunications Act, he said.

The TSO will determine the cost of maintenance and how it should be shared by various parts of the industry.

Comments from our readers

No comments yet