The OECD has shot down Telecom's excuse that free local calling is behind New Zealand's poor uptake of high-speed internet, saying the company is abusing its market position.
"The OECD has never argued that free local calling means there is more of an incentive to stay on dial-up than move to broadband," said Dimitri Ypsilanti, head of the telecommunications unit in the organisation's Paris-based Directorate of Science, Technology and Industry.
"There is no evidence to link broadband penetration with the existence of untimed local calls."
Organisation for Economic Co-operation and Development broadband statistics, released a week ago, show that despite being one of the first countries to introduce high-speed internet, New Zealand is still near the bottom of uptake rankings - 22nd out of 30 member countries, unchanged from six months ago.
In response, Telecom restated its view that free local calling was the key reason why people were staying off broadband, in that it was allowing dial-up users to stay online for as long as they wanted without incurring further charges.
Telecom said this was suggested in "more than one OECD report this year - and needed further consideration by the Government".
But Ypsilanti, whose directorate is responsible for researching and analysing internet trends across the OECD, said Telecom's reasoning was an excuse. He said broadband uptake had flourished in other countries with free local calling, such as Canada and the United States - ranked sixth and 12th.
"The problem in New Zealand is the lack of competition," he said, adding that a key Government decision in 2004 had prevented competitors from accessing Telecom's network.
This resulted in high prices and slow speeds, and had allowed the company to put caps on how much data customers could download.
"That's a disincentive for people to sign up - there aren't many countries with data caps. This is the outcome of lack of competition," he said. "Telecom has a bottleneck and it is abusing its bottleneck."
Ypsilanti added that free local calling was indeed a factor in the early days of internet development. But countries with high dial-up uptake - such as New Zealand - had generally been quick to migrate to broadband because customers wanted more speed, he said.
Communications Minister David Cunliffe agreed with Ypsilanti's statements. "While free local calling may well have been a factor a few years ago, I think it's much less important now," he said, adding that the real issue was the high cost of broadband. "It's still expensive relative to most developed countries."
Telecom's reasoning has incensed some experts. Colin Jackson, president of InternetNZ, said the company's comments were "completely self-serving".
"It's specious, it's simply not correct, it's got nothing to do with it," he said, pointing to Canada where broadband uptake is high despite free local calling.