Positive reaction to interconnection agreement

The announcement that the two giants of New Zealand's telco market have reached agreement over most of their long running disputes was greeted with relief yesterday.

The announcement that the two giants of New Zealand’s telco market have reached agreement over most of their long running disputes was greeted with relief yesterday.

Telecom and TelstraClear have reached a commercial agreement to cover most aspects of their interconnection business, from toll free number portability to the model for local calls. Pricing for interconnection is still to be determined by the telecommunications commissioner, Douglas Webb, but the companies have agreed on nearly all the other issues before him.

Telecommunications Users Association (TUANZ) chief executive Ernie Newman says it's a great first step, but that there are other areas of interconnection that still need to be addressed.

"There's no decision yet on mobile to fixed line calls or vice versa, and that's a huge area and the question of incremental charging - will calls be billed by the minute or by the second after the first minute - is yet to be settled."

Overall, Newman says the moves are good for the industry, and he credits the threat of telecommunications regulations being handed down by the commissioner with getting the deal signed.

Auckland-based Macquarie Equities head of research David Stanley says the agreement cements in place the understanding reached between Telecom and TelstraClear since the end of their official contract.

"'Bill and keep' was something the two were already agreed would be a good idea before the commissioner suggested it, so this simply formalises the situation. It's eminently sensible."

"Bill and keep" is the literal name given to the pricing model the telcos will adopt and should mean the end to interconnection fees and the kinds of wrangles that saw the free ISP market burst onto the scene. Telecom and TelstraClear will no longer bill each other for customers' connections across the networks.

Stanley says the only thing the commissioner must sort out now, the price range for billing, also seems to be heading in the right direction.

"The price the commissioner set out in his draft ruling [1.2 to 1.4 cents per minute] … was well lower than before and may be a little lower than market consensus."

Stanley says he was expecting a slightly higher figure because of conditions in the New Zealand market.

"If the final number is in that range I think that's something that everyone can live with and it's still sufficient to allow for a reasonable level of investment in infrastructure."

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