Ihug and Callplus break off CUBS talks and go to regulator

ADSL2+ coming in June

Two of the country's largest ISPs, Callplus and Ihug, have decided call off commercial negotiations with Telecom over wholesale DSL and have separately applied to the Commerce Commission for a regulated service instead.

The reason for the breakdown in negotiations between Telecom and the ISPs were legion: Callplus is unhappy with the speeds offered by Telecom, CEO Annette Presley says, and wants the full 8Mbit/s download first generation ADSL is capable of. Presley also says Telecom has lowered the retail price of its Xtra DSL, but held what it charges wholesalers, thus eroding already narrow margins on broadband for providers.

Likewise, Ihug wants full-rate DSL downstream and better pricing from Telecom, according to CEO Mark Rushworth. At the moment, Telecom has said it will increase the download speed of both its retail and wholesale DSL to 3.5Mbit/s maximum. The upload speed will remain at 128kbit/s however, for all plans apart from the top-of-the-line ones which are aimed at business users.

Both Callplus and Ihug hope that the communications minister, David Cunliffe, will revisit local loop unbundling. Presley hopes the Commerce Commission will conclude its investigation quickly, as it already spent eighteen months on the determination on TelstraClear's application. In that case, the Commission determined that Telecom should sell a regulated Unbundled Bitstream Service to TelstraClear, with the downstream speed set to the maximum that today's DSL equipment can provide, namely 7.6Mbit/s, and an upstream of 128kbit/s as per the Telecommunications Act 2001.

However, Telecom threatened to challenge the determination in the courts. Fearing further long procedural delays, TelstraClear decided instead to accept a commercial offer from Telecom for a slower 3.5Mbit/s service, which included $17.5 million in cash to compensate for historic business losses.

Recounting TelstraClear's experience, Presley expresses concern that Telecom will challenge the Commission's decisions in the courts, so as to keep the regulated service off the market.

Telecom spokeswoman Sarah Berry says the telco is disappointed that Ihug and Callplus have applied for a regulated service but says the door is still open for further negotiations.

She says that Telecom prefers to reach a commercial agreement rather than a regulated one, as it believes this will be better for all parties.

Berry says the issue of increasing the download speed to full-rate is complex, and that it's not guaranteed that either provider will get twice the 3.5Mbit/s that they would have under Telecom's commercial service.

Asked if Telecom would withdraw its current commecial wholesale offer due to the applications, Berry says a handful of providers have already signed up for it and will get the service in April as planned. Telecom would not name the ISPs that have signed up and none of the ISPs contacted by Computerworld have signed on to the commerical service.

Ihug's manager of regulatory and industrial affairs David Diprose says one ISPANZ member's CUBS negotiations were halted because of the applications for regulated service.

Telecom will launch it's new retail DSL plans via its ISP arm, Xtra, in early April as planned, Berry adds. There has been no change to these she says. The Commerce Commission was not available to comment on the decision to allow Xtra to launch the plans ahead of a regulated service.

In June, Telecom will also launch the faster second-generation ADSL2+, according to Berry. This follows the roadmap as set out by Telecom's manager for technology investment, Stephen Crombie, last year, and recent statements from chief executive Theresa Gattung and Alcatel's regional head Hilary Mine. Berry didn't mention the scale of the ADSL2+ launch, or where it will take place.

In February last year Computerworld reported that Telecom's ADSL2+ service will run at 15Mbit/s downstream, and 1Mbit/s up for customers up to kilometer away from the DSLAM, situated in the roadside cabinets. This level of speed would enable Telecom to provide "triple play" service - voice, video and data - over the network.

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