Telecom shows its hand

A regime which preserves free voice calls - but in which ISPs pay network providers for carrying their traffic - is at the centre of Telecom's submission to the ministerial inquiry into telecommunications.

A regime which preserves free voice calls - but in which ISPs pay network providers for carrying their traffic - is at the centre of Telecom's submission to the ministerial inquiry into telecommunications.

Telecom yesterday outlined its proposal for changes to the interconnection framework it effectively mandated in the mid-90s.

The company still maintains that the Kiwi Share requires it to "price residential access service to a significant number of customers at below cost."

But rather than seeking to factor that into per-minute interconnection charges - a strategy that backfired badly with the boom in Internet calls being terminated with its rival Clear, and led to the 0867 scheme - Telecom is now seeking co-operation and even regulatory oversight.

“Telecom believes the inquiry should focus on how all providers might potentially contribute to the costs involved in the loss-making part of residential access service," says its general manager of government relations, Bruce Parkes.

“Where a cost subsidy exists, it should be explicitly funded by the Government or shared equitably among all industry players."

Specifically, Telecom is proposing that:

• The telecommunications industry would agree on "principles for promoting economic and network management efficiency, innovation and investment, and public confidence in interconnection processes."

• A standard contract for interconnection with Telecom would be subject to ratification by the Commerce Commission.

• The Commission would be empowered to review existing agreements "in the light of changing circumstances."

• Every two years, the Commission or another independent body would provide "meaningful international comparisons between interconnection prices in New Zealand and elsewhere."

Telecom says commercial negotiation should remain the key to interconnection between different networks, but with new industry-wide principles as the starting point for all negotiation.

“New Zealand is moving to an environment where a number of networks based on both fixed line and wireless technologies interconnect with each other, and increasingly interconnection will be priced on a reciprocal basis,” says Parkes.

Telecom proposes keeping the Kiwi Share, but says that Share as it is currently interpreted means Telecom receives no incremental revenue from the huge growth in Internet traffic on its network. Telecom says its key proposals are:

• Free local calling would be retained for all residential customers.

• Distinction between local voice calls and Internet traffic, with Internet service providers paying network providers for carrying their traffic. These payments would be on the same basis as current toll bypass call payments.

• Good quality voice standard calling available throughout New Zealand, including rural areas where the costs of providing such service are subsidised and this subsidy is shared equitably among all telecommunications industry participants.

• Internet/online quality service would be provided in rural areas with cost subsidies from the government to reflect explicit social objectives.

• Telecom and other local residential voice service providers would not be able to raise residential line rentals more than the annual inflation rate but would be able to reduce line rentals.

As might be expected from the relatively modest nature of its proposals - which would appear to offer more to Telecom than its competitors - Telecom does not believe the regime needs a radical overhaul.

"The telecommunications sector is performing well and it is important not to overstate the extent to which there are fundamental problems with the current framework," the submission says.

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