Another win for Telstra

Allan Freeth says he is disappointed Telecom is still considering legal action.

The Commerce Commission has broken Telecom's stranglehold on the high-speed internet market and allowed competitor TelstraClear to sell its own broadband offerings on Telecom's network.

But yesterday's ruling by the market regulator, which would result in lower costs and faster access for most internet users, is likely to be appealed by Telecom as early as next April.

Telecom had been seeking a judicial review of the commission's draft proposal released in October, which was largely similar to yesterday's ruling, but decided to cancel its plans. The hearing had been scheduled to begin today. Had the judicial review taken place, the regulator's decision would have been delayed well into next year.

Bruce Parkes, Telecom's manager of regulatory affairs, said the ruling allowed for an 18-week implementation period instead of the four-week period initially proposed.

The longer time-frame will allow Telecom to begin implementation of the ruling and have time to seek court intervention before TelstraClear hits the market with broadband.

Parkes said Telecom did not want to be seen as taking legal action to delay competition so it pulled the plug on the initial hearing date.

If Telecom pursues court action, which Parkes said was likely, it will argue that the commission's "one-size-fits-all" approach to pricing is "fundamentally flawed".

The ruling sets TelstraClear's per-user charge to $27.87 regardless of speed service.

Parkes said the ruling made broadband less profitable for Telecom and "uneconomic" in rural areas.

"The economics don't stack up for us to do any more investment in rural New Zealand. We're unlikely to make any further investments," he said.

Allan Freeth, TelstraClear's chief executive, said he was "frustrated and disappointed" Telecom was still considering legal action.

" The only ones who are losing out are consumers," said Freeth.

TelstraClear was pleased with the commission's ruling and hoped to have details of its broadband offerings made public as early as March. But the date is dependent on when the legal wrangling is complete.

Freeth said while the decision represented a positive step forward, the company was still calling for the Government to review the regulatory environment.

"We might recoup some of the ground we have lost by not participating in the market while we've awaited this decision," said Freeth.

Yesterday's ruling is TelstraClear's second victory over Telecom in a month. Two weeks ago, the commission granted it access to several of Telecom's broadband business services.

Regulation game

* October - The Commerce Commission issues draft regulation siding with many aspects of TelstraClear's application to allow it access to Telecom's high-speed network.

* November - Telecom seeks a judicial review on the commission's draft regulation, potentially pushing the ruling into 2006.

* December - Telecom drops the review. The commission grants TelstraClear the ability to sell its own broadband offerings on Telecom's network. Telecom plans to appeal the decision.