Commerce Commission tinkers with telco charging regime

The devil's in the details, however, warns Telecom

The Commerce Commission has released a draft determination on the review of voice call interconnection charges that Telecom and TelstraClear applied for under the Telecommunications Act 2001.

Both telcos applied to the Commission for a review of the present $0.0113 per minute interconnection charge, which is what fixed-line operators pay each other for landing calls on their respective networks. The application was made in November 2002.

The Commission's draft determination sets the interconnection charge at one cent per minute but added that the reduced charge will apply retrospectively from June 2002. Telecom and TelstraClear will be asked to reimburse each other for any overpayment during that period, the Commission says.

The Commission will now hold a conference on the issue and release a final determination at a date yet to be set.

In a separate announcement, following months of wrangling, the Commission has finally nailed down the guiding principles for working out the costs that will be used to calculate the discounts TelstraClear and other access seekers will get when reselling Telecom's products and services.

Currently, access seekers get up to 16% discount on services such as Jetstream, but only 2% on price-capped services like the home line rental. The former figure was determined by the Commerce Commission with the help of international benchmarks, and the latter set out in the Telecommunications Act of 2001. TelstraClear, which is currently reselling Telecom's services, applied last year for a review of the discounts under the Telecommunications Act, as executive Rosemary Howard said the 2% margin was too small.

Asked what effect the principles would have on the discounts, the Commission's network and access manager, Osmond Borthwick, says the principles describe at a high level the costs that are avoided by Telecom when it resells services to access seekers. Borthwick adds that the principles will underpin the calculations in the Commission's draft determination, due out middle this year, which will replace the existing discounts. However, Borthwick won't be drawn on how much exactly the discounts would change.

TelstraClear spokesman Mathew Bolland says the telco engaged leading international economists to interpret the cost principles under the Act and says the new principles are a step tworards a sensible wholesale discount. TelstraClear is pleased that the time and effort it has expended on the issue has resulted in things progressing, Bolland adds, and says the telco is looking forward to establishing appropriate pricing so that it can offer an alternative to Telecom in areas where it doesn't currently have a network.

However, Bolland wasn't able to say how much the principles will affect the resale discounts it would get.

Telecom's government relations manager Bruce Parkes says the new document is better than the initial paper which was used for determining the existing resale discounts. He says that Telecom doesn't expect the discount rates to change materially, however, and adds that the 2% margin reflects the value access seekers are providing.

"Telecom does 98% of the work," Parkes says, adding that TelstraClear's contribution is nothing more than "licking the stamps on the envelopes" with bills to its customers.

"The devil's in the details," Parkes cautions, with large chunks of cost allocations still to be determined.

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