Ihug boss wary of telco "games"

Ihug managing director Nick Wood says the telecommunications market shouldn't be organised at the whim of Telecom and Clear.

Ihug managing director Nick Wood says he is wary of the "game-playing" by Telecom and Clear in their new peace pact over 0867.

Wood, whose ISP ranks second in the local consumer market, says it is hard to know what to make of the deal in the absence of any public detail on its interconnection component.

"As usual it's the two big players trying to set the game plan for everybody and we all get dragged along whether we like it or not," he says. "We're hoping to see the end of that with the ministerial inquiry - where someone else decides how it goes and sets a level playing field, rather than it being at the whim of the two incumbents.

"Obviously these two are trying to negotiate a deal before the government tells them what to do. Whether that's a kill-everybody-else-off deal or not, we don't know."

Wood has been a trenchant critic of the Clear-aligned free ISPs - i4free and Clear's own Zfree - whose chief source of revenue is interconnect payments from Telecom. He says Ihug was approached by Clear last year proposing a similar 0867 workaround to that operated by i4free.

"The reason Clear's done all the stuff they've done is because they've realised that they've got no real negotiating strength and they needed to do some stuff to put pressure on Telecom to come to the table and be reasonable. So the whole invention of the free services was primarily to put on the pressure to get that happening. Otherwise Telecom wouldn't be talking to Clear at all - they'd just let the clock run out."

The impression in the industry is that the prospect of a damning report on the 0867 scheme on TV One's 60 Minutes helped force Telecom's hand - hence the deal being announced at 6pm on Sunday, 90 minutes before 60 Minutes screened.

"As usual nobody from 60 Minutes came and asked us," says Wood. "It just annoys me the amount of coverage that these carpetbaggers are getting when what they're trying to do is rape and pillage the environment rather than doing something realistic. No one seems to be getting the message that these people are robbing Peter to pay Paul.

"I don't think Telecom will want to see this arbitrage scenario continue because it's just not viable for them to keep paying buckets of money for effectively provisioning a vast amount of network resources. But Clear seem to be saying they still expect to get paid."

Wood says he expects the two free ISPs to carry on signing up new customers until the temporary pact gives way to a new interconnection agreement.

"Clear will keep on doing what they're doing for the next three months, otherwise the pressure's off. They couldn't really pull the pin on i4free, otherwise the injunction would disappear and all the pressure will fall away.

"I wouldn't expect the free ISPs to fall away until then, but I can't see a future where Telecom continues to pay for other people to surf the Net without getting some revenue from the customer.

"I don't really have any issues with people running free ISPs if they can do it without using some kind of loophole. But the only places that has worked are countries where there isn't free local calling and where there's a revenue share."

Wood believes the Kiwi Share - which requires Telecom to provide free local calling - has become an anachronism and is holding back local loop competition. Ihug's submission to the ministerial inquiry also calls for a per-minute interconnect charge capped at the length of the typical voice call.

"For another carrier to start a free local loop service in New Zealand at the moment, you're stuck with paying Telecom upwards of three cents a minute to terminate the call, but you have to give the call for free to the customer to be competitive. That's what's stopping people building a local loop network at the moment - the unknown amount of long-term costs.

"Whereas if it was a capped call cost, you could give people thousands of calls every month and it'd still only add up to a few dollars, which you'd build into the monthly service fee.

"But that's up to the government - whether anyone's got the will and the nerve to dump the Kiwi Share. That would have short-term consequences in the public eye, but in the long term it would be more economical for us all."

Wood doesn't, however, completely dismiss the prospect of good things from the two big carriers' new rapport.

"Maybe Theresa Gattung and the new blood on both sides means they can come to an arrangement that's equitable and set some kind of precedent," he says.

"It's still driven by pressure from each side rather than sensible decision-making. I don't think you can keep this situation up where one guy gets a better deal because he's got more bargaining power. That just flies in the face of competition, because every little guy out there is never going to get a fair deal, even if he can provide more cost-effective and cheaper services.

"A duopoly still doesn't look like the right answer, but if it gets rid of this situation of somebody getting something for nothing then we're all for that."

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