Unconstrained bitstream, but at a higher cost

Wholesale price for Ihug and Callplus now higher than that specified under last year's TelstraClear determination

Telecom has granted Callplus and Ihug access to unconstrained wholesale DSL, but the two providers have little reason to celebrate, as the cost has gone up compared with that specified in the TelstraClear determination last year.

The access price, set by the Commission for Regulated Unbundled Bitstream Service (RUBS), will be $28.04 per month.

In December the commission granted TelstraClear wholesale access to unconstrained bitstream services from Telecom and set the price at $27.87 per month.

The commission says the imputed retail price is $33.38. The avoided costs saved are set at 16%, or $5.34.

The commission says the higher price is because of a slight increase, of 59 cents, in the weighted average retail price, between December 2005 and June this year. This was the result of customers migrating from lower-value to higher-value plans. Details of how the different plans affect the weighting of retail pricing have not been released, however, as they are commercially confidential.

While the weighted average retail price has increased, the so-called churn fee, payable to Telecom when customers switch providers, remains the same at $20.

David Diprose, Ihug’s general manager of regulatory affairs, says he can’t understand why the wholesale price has gone up, as the broadband retail price has gone down.

The expected price, using the commission’s model which is based on regression analysis of retail costs, would be in the $20-$22 range, says Diprose.

Ihug is still digesting the new determination, says Diprose. But, he says, the high wholesale price makes it “disappointing”. It won’t be possible to make a profit on the RUBS at the current price, says Diprose.

The commission’s decision will remain in effect for two years. It is based on the existing TelstraClear determination, which was released in December last year. At that time, Communications Minister David Cunliffe’s tough new regulatory package for Telecom had not yet been made public.

In the determination, Telecom says that it accepts the wholesale pricing and discount calculations.

It has made no further comment on the decision.

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