ISPs formally complain to Commerce Commission

'We're peasants collecting money for Telecom', says one provider

New Zealand's ISPs have banded together in an unprecedented move to put the heat on both Telecom and the telecommunications regime, saying they are prevented from providing their customers with decent internet services.

Two dozen ISPs have sent a long and detailed letter to the Commerce Commission damning the current wholesale regime as suffering from technical limitations that make it unsuitable for many applications and a pricing regime that makes it difficult or impossible for ISPs to turn a buck.

In the letter, ISPs say they intend to educate their users, the public and the Government about the issues facing them, and can no longer hold back their collective voice for fear of punitive commercial action from Telecom.

"We believe that these challenges are sizeable and are causing many of us to seriously reconsider decisions to promote broadband services based on Telecom's wholesale broadband services to New Zealanders," the letter days. "In other cases we have deferred the decision to offer broadband service or delayed deployment of innovative broadband services that depend upon true broadband."

The letter runs to 1,100 words. ISPs who signed it are understood to include Actrix, Acute Systems, BayCity, Compass/Iprolink, Globe.Net, Iconz, Igrin, Ihug, Inspire, PCNet, Plain Communications, PlaNet Communications, Quicker Net, Quicksilver, Quik Internet, Snap Internet, Tasman Solutions and Wise Net. Orcon, Telecom's Xtra and ISPs owned by TelstraClear are notably absent.

Alan Marston, the director of PlaNet, briefly posted the text of the draft online. Marston says he posted the letter because he feels very strongly about the issue and wants it to reach the public eye.

Marston says under the current regime, ISPs are nothing more than "peasants collecting money for Telecom" and providers other than Telecom and TelstraClear will fail unless there are changes.

The letter details numerous problems with the wholesale regime as the ISPs see it, including pricing, which they claim makes the service unprofitable in the face of Telecom's continued ability to offer discounts on connections and customer premises equipment, and "onerous payment guarantees" for ISPs wanting to wholesale services which amount to three months' worth of expected charges paid in advance. The guarantees can reputedly amount to several hundred thousand dollars for a medium-sized ISP.

The ISPs are also unhappy that Telecom can introduce its own retail plans ahead of any wholesale equivalent, something Telecom has done in the past and which is considered unacceptable in most overseas jurisdictions.

The letter has been sent to the Commerce Commission. However, when contacted by Computerworld, the Commission's communications manager had not seen it and refused to comment or to allow Telecommunications Commissioner Douglas Webb to be interviewed.

Communications Minister David Cunliffe also had not seen the letter, but told Computerworld he would like to see a copy. However, he later issued a statement saying: "It is not for me to comment on the content of a leaked letter to the Commerce Commission. The letter is for the Commerce Commission to deal with if and when it receives it."

Cunliffe is willing to comment on the broader issue, saying the Government regards a healthy and competitive broadband wholesaling market as essential. He adds that the commitments Telecom has made on wholesaling are important and that he will consider an unspecified Government response if the telco doesn't meet them.

Cunliffe says Telecom needs to make progress in terms of price, service and speed for broadband. He adds that if ISPs wish to write to him they are welcome to do so.

Webb has raised the spectre of increased regulation if Telecom doesn't do more than the bare minimum required. He told an Auckland conference last month that "structural separation" — or the forced division of wholesale and retail arms — is something that incumbent telcos are facing overseas.

ISPs started talking in May and June this year about writing an open letter to Government Ministers Paul Swain, Cunliffe and Jim Anderton about their issues with broadband, with copies going to Webb, Opposition telecomms spokesman Maurice Williamson, Telecom's head of wholesale Tim Lusk and the media.

Matthew Hobbs, manager of Auckland ISP Quicksilver, says that while he wasn't involved in drafting the letter, he is "mostly in agreement" with its sentiments. He regrets that the draft was made public on the web — a view shared by Palmerston North ISP director James Watts, who feels this has lessened the effect of the letter.

In summary, the letter states that wholesaling Telecom broadband is not profitable for ISPs as Telecom offers discounts off the retail price from which its wholesale price is calculated by bundling broadband with other services such as tolls. Telecom also provides 100% discounts on installation fees to its retail customers but adds further charges for wholesalers' data backhaul.

Other issues covered by the letter include lack of visibility of the network, meaning non-Telecom ISP customers are often in the dark about outages and provisioning of new services. ISPs are also concerned about the limited upload speed of 128kbit/s which is called a "serious impediment" as it effectively hinders the use of any application that needs to pass data upstream from the customer.

The high contention rate of 50:1 customers to bandwidth is also singled out, as on Telecom's 256kbit/s unbundled bitstream service (UBS) peak time bandwidth is reduced to as little as just over 5kbit/s, or ten times slower than 56kbit/s dialup modem connections.

The high latency for packet round trips means Telecom's network is unsuitable for many "delay sensitive applications", the ISPs say. Parity between Telecom's wholesale and retail products is demanded by the ISPs who say that ultimately, unbundling the local loop is the only way to ensure that New Zealanders have unimpeded access to competitive information and communications services.

Orcon's managing director, Seeby Woodhouse, says he didn't sign the letter because he doesn't agree with the request for local loop unbundling. With LLU, Woodhouse says only the bigger players such as TelstraClear, Iinet/Ihug and possibly CallPlus could afford to put their own equipment into the exchanges.

Smaller players would be better served by improved wholesale terms from Telecom, Woodhouse adds.

Last month Woodhouse said Orcon is losing $50,000–$100,000 each month providing UBS, which is effectively subsidised by its dialup customers.

Malcolm Dick of CallPlus says he wasn't asked to sign the letter, but would have if given the opportunity. It raises the very issues CallPlus is concerned about, Dick says.

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