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ISPs Incensed By Telecoms Price Squeeze

26 September 2006

ISPs Incensed By Telecoms Price Squeeze

Auckland, Tuesday 26 September 2006 - New Zealand's leading internet providers are concerned by Telecom's proposed pricing for its full speed broadband products which place a price squeeze on ISPs. Telecom has resisted making full speed plans available to ISPs until now. Following an application to the Commerce Commission by ihug and CallPlus, Telecom has been instructed to make full speed plans available to ISPs this month.

Internet Service Providers Association of New Zealand (ISPANZ) Director Graham Walmsley said, "Telecom has cynically taken the opportunity to create a price squeeze for ISP's with its new plans - the most obvious being the entry level product at $29.95, inclusive of GST, which the ISP's have to purchase from Telecom at $31.55, inclusive of GST".

Telecom's own wholesale charter states that 'The price for such products [including UBS] will be negotiated on a 'retail minus' basis such that an efficient and effective wholesale customer can compete with Telecom at retail.

"This recent move shows Telecom is ignoring the commitments it has made," said Mr Walmsley. "The plan and price changes have been launched with no negotiation or consultation with ISP's whatsoever, despite Telecom's commitment to start behaving more cooperatively - and despite committing to do so in the Wholesale Charter.

"Telecom is engaging in some confusing marketing but the bottom line is that on the entry level price ISPs will pay more for the service than their retail customers.

"Put simply, either Telecom is pricing below cost or the price they charge ISPs is too high. Telecom has tried to suggest that the price was set by the Commission and its hands are tied, but this simply is not true. Telecom is always free to set prices at or below the maximum price allowed for a regulated service.

"Telecom is back to its old tricks. The commitment to start co-operating and the pledges that Telecom 'gets it' are shown to be worth nothing.

"Nothing has changed and this leaves the industry players with some serious concerns," concluded Mr Walmsley.


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