ISPs wary of Telecom 'lifeline' proposal

Telecom has proposed its own national IP network as a lifeline for independent Internet providers who fear ruin in the face of Xtra's price strategy.

Telecom has proposed its own national IP network as a lifeline for independent Internet providers who fear ruin in the face of Xtra's price strategy.

Although the idea of such a network is far from being official policy, Telecom representatives have canvassed the plan with several major ISPs in response to their complaints about what they regard as predatory pricing by Xtra.

Most ISPs have been wary about the concept, which would help give all retail ISPs the same network cost structure as Telecom Xtra--but would effectively deliver the national Internet business to Telecom, which would have control over access pricing.

Telecom is refusing to comment on either the IP network proposal or on the grievances of ISPs, but one ISP manager who knows of the idea told Computerworld that the concept "would provide a workaround to the current situation--but it would also totally negate the idea of having a business".

Meanwhile, the Internet Service Providers' Association of New Zealand (ISPANZ) has been formed at an occasionally stormy meeting in Wellington. A press release announcing the new body says it has been "precipitated by unprecedented price moves by Telecom which affect the ISP market."

The association's membership of 40 may diminish, however, if it styles itself as an anti-Telecom organisation. Representatives of IBM Global Network and CompuServe attended the meeting and supported the idea of an ISP lobby group but were apparently unhappy at the idea of ISPANZ defining itself in opposition to Xtra.

At the other extreme, representatives of some ISPs had to be talked out of a radical plan to block access by their own customers to any Telecom-owned domains, in an effort to deprive Xtra of audiences to sell to its advertisers.

In the official release, ISPANZ spokesperson Ron Woodrow says Telecom "appears to be pricing certain services below their true cost in a bid to attract customers to its Internet service from other Internet dervice providers.

"We believe that Telecom will be unable to sustain artificially low prices for any extended period and that it will then return prices to normal non-discounted levels. Meantime, however, many smaller operators may be squeezed out of business, leaving Internet customers with limited choices of providers.

"All ISPANZ members compete with each other providing a wide choice of pricing structures and services for the different needs of Internet customers. Fair competition is healthy and good for everyone--but fair competition must take place on a level playing field."

Woodrow says ISPANZ would be joining several individual member companies in making a submission to the Commerce Commission, which will "ask the commission to evaluate whether Telecom's pricing structures are fair. The major issues are whether Telecom is penalising other Internet service providers by charging them more than it charges its own Internet service provision division for Internet toll calls; and whether Telecom is using its dominant position in the telecommunications market to restrict competition in this Internet service provision market."

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