Posted on 14-6-2004

Telecom's `Broadband' Plans Unpopular
By Paul Brislen, NZ Herald

Internet providers are crying foul over Telecom's proposed wholesale
high-speed internet plan before it is even launched, saying they cannot
make a profit from it.

Telecom has begun seeking comment from internet providers on the terms of
its new wholesale product. The final service will be offered to the public
from September.

One provider, who did not wish to be named, said the new service would
have to attract "thousands of customers" to be profitable.

"On the basic plan we'd see a profit of about $14 per customer per month.
Out of that we have to pay for backhaul, help-desk services, international
traffic, any extras we want to offer like anti-spam filtering and so on.
It's just not worth it."

Providers are also concerned about Telecom's decision to impose a transfer
fee of $150 for every Telecom customer who moves to a competitor, with one
network operator describing it as a "tax on competition".

"It's got to be anti-competitive. Surely everyone will see that," said the
operator, who also did not wish to be named.

Internet provider Iconz would most likely pass the fee on to end users,
said managing director Sean Weekes.

"It's not really much of an incentive to deliver thousands of customers."

Telecom spokesman Martin Butler said the plans were designed to increase
the overall number of broadband users.

"We've publicly said we want to reach 250,000 users by the end of next
year and that around 30 per cent of those would come from our wholesale
product.

"We are looking for new customers not a realignment of the existing
customer base."

Butler said the onus was on internet providers to use the basic service to
differentiate themselves from one another and target niche markets.

"If they want to offer free national traffic or set up game servers to
offer a gaming service then they can."

One of the country's largest internet providers, ihug, said the wholesale
programme would offer only minimal encouragement to providers to offer new
services to customers.

"It's only wholesale for the one product," said general manager Guy Nelson.

"There's not enough money to make it worth our while and Telecom's already
got a headstart on the customers that do want such a service because
they're already signing them up today."

TelstraClear will discuss the offer with Telecom next week and would not
comment until then.

Auckland's Orcon Internet, the first company to sign up with Telecom's
wholesale agreement, was generally positive about the offer, said chief
executive Seeby Woodhouse.

"Telecom should be commended for going beyond what the Telecommunications
Commissioner recommended to the Government. They've handed control of the
customer to the provider instead of keeping it to themselves, which they
could have done."

But Woodhouse said he was unhappy about the $150 transfer fee, which would
inhibit the delivery of broadband services by smaller providers.

"There's probably a capital expenditure of around $250,000 to get going in
this business and really you need to aggressively target customers from
day one.

"Having to pay a $150 fee upfront is going to limit the providers in that
respect."