A High Court judge has ordered Telecom to reconnect 0867 numbers associated with "free Internet forever" ISP i4free, as the matter gets stranger and more complex.
Justice Robertson said yesterday that Telecom must reconnect service on the numbers allocated to i4free and two related companies until a hearing next week.
In events yesterday, i4free went to court seeking an injunction against Telecom; Telecom accused i4free, its sister companies and Clear Communications of underhand behaviour; and Ihug boss Nick Wood vigorously defended his company's blocking of i4free.
Telecom turned off i4free's 0867 dial-up number on Friday, its launch day, when it began diverting calls through to numbers on Clear's network. When i4free began using the 0867 numbers allocated to sibling companies Attica and Worldxchange, those were cut off too, but Worldxchange's have been reinstated.
The events, which took place after a group of companies related to CallPlus switched networks from Telecom to Clear, resemble those of last year, when Telecom switched off a similar call diversion system employed by Web Internet. Telecom allows 0867 numbers to be terminated by any carrier, including Clear, but will not tolerate the same thing being achieved by diversion.
The diversion has two effects - it takes calls out of the system Telecom says is essential to manage Internet-related calling - and it obliges Telecom to pay per-minute interconnection charges to Clear under their interconnection agreement. When Telecom introduced 0867 last year, it said that, as a new number range, it was not covered by existing interconnect agreements.
It appears that i4free is deriving at least some of its revenue via so-called arbitrage - that is, being rebated a part of the per-minute charge Clear is earning from Telecom.
Clear's public affairs manager Ross Inglis declined to confirm yesterday whether Clear and i4free are operating an arbitrage system, but said, "if that was the case it wouldn't be all that abnormal. It's quite a normal practice in the industry.
"The use of interconnection payments in that way acts to control interconnection charges. If it's positive to leverage interconnection payments in that way then the network owner is likely to negotiate a fairer interconnection agreement. That's the way it works overseas. It's an economic principle that doesn't get to work because of monopoly control in this country. As far as we're concerned, arbitrage is not a dirty word."
Finer economic arguments have, however, fallen out of the debate as Telecom suffers a PR disaster, with the Muscular Dystrophy Society being among those hit by its disconnections, and the Deputy Prime Minister, Jim Anderton, declaring on National Radio that its conduct was anti-competitive.
Wayne Toddun, managing director of Attica, and a director of i4free said the companies "didn't believe for a second that Telecom would disconnect us - we've got live users on our network including business users and charities. We're using exactly the same method that i4free was using to connect to its customers - only we've been doing it since November last year. The only reason they disconnected us was that we were assisting i4free. Telecom has caused us an enormous amount of damage and we'll be seeking relief for what this has cost the business."
I4free CEO Annette Presley described Telecom's move as "blatant discrimination. [Telecom] just don't want unlimited free Internet access in New Zealand."
Telecom hit back late yesterday, with a statement from general manager of industry and government relations Bruce Parkes saying that it should be "no surprise for these companies" that Telecom had turned off their access.
"Telecom has been talking with CallPlus and associated companies since September. In at least five separate letters Telecom told CallPlus that 0867 numbers could not be diverted to another carrier's access lines in breach of the agreement the two companies had."
Parkes criticised Clear for "acting irresponsibly. It is paying these free Internet companies, from the money it gets from Telecom, to shift Internet calls around our network in a complicated way which completely negates the network management benefits of 0867."
Last night, Ihug managing director Nick Wood was also scathing of i4free, and unapologetic about blocking his own customers' access to i4free's Web site - which is hosted as a virtual domain on Attica's Web server, which is connected in turn to the Internet via Clear frame relay.
Ihug also blocks access to Freenet's Website, but not email or other traffic from the free ISPs.
"We have a valuable service that people are prepared to pay for and we're not prepared to have them create an unnecessary churn in our customer base with a model we don't believe is sustainable, and have our customers think they're getting something for free - which in the long term they won't.
"You don't see us blocking any of the commercial ISP sites because we all have our own businesses, we all sell a service for what it is and people come and go from each customer base as they choose.
"The only way these companies can survive is to use this method - they get a bit of free publicity and stick up a Website and hope people move. In the real world they'd have to run a call centre and advertise like everybody else and get their customers the normal way.
"Basically what people are doing is creating this imaginary world where shit's free to try and get customers quickly, because they missed the boat when the game started a year or two ago."
The FAQ on i4free's five-page Website says customers will continue to be able to use their POP mail accounts at their existing providers while dialled up with i4free.
"That's not going to happen either. We've been blocking any kind of access like that to our SMTP servers for years to prevent spam. That was one of the claims that Freenet made - come and join us and use your existing ISP's POP server and SMTP server. They're saying, we're not having a mail server - or don't plan to in the near future. They don't even have a news server."