ISPs reject Telecom offer on broadband

Two of the nation's largest internet service providers have escalated the broadband war by rejecting Telecom's latest wholesale offer in favour of seeking better terms from the Commerce Commission.

CallPlus and ihug, the third and fourth-largest ISPs respectively, said yesterday that they had been forced into a corner by Telecom, which was not willing to negotiate on several key terms.

"They will not negotiate with us. Telecom will not come to the party," said Annette Presley, chief executive of CallPlus' Slingshot internet division.

"This is not a lightly made decision. We're hoping something will change because it's an unsustain-able position, for us and for New Zealand."

CallPlus, which has about 130,000 customers overall and about 20,000 on broadband, said it would lodge its application on Monday or Tuesday. Ihug, the fourth-largest ISP with about 100,000 customers and 25,000 on broadband, said it would apply today.

Both will be seeking the exact same determination that was granted to number two ISP TelstraClear in December, which included access to broadband speeds up to 7.6 megabits per second. Telecom had threatened a legal challenge to the ruling, and TelstraClear opted to avoid a battle by agreeing in January to a lesser, 3.5-megabit service.

The ISPs hoped their applications would be granted quickly - possibly within four to six weeks - given that the TelstraClear ruling had set a precedent.

Telecom said it was disappointed the two ISPs had opted to go to the commission.

"We have been talking to them in good faith and we would have been keen to continue down that path as we have with other ISPs," said Telecom spokeswoman Sarah Berry. "Our door is open to continued discussion."

The ISPs said they were dissatisfied with the speeds, wholesale price, data restrictions and network setup being offered.

Telecom was offering the two ISPs services similar to its recently unveiled retail plans, which it hailed as faster and cheaper. CallPlus and ihug, however, maintain that the services are neither.

Presley said Telecom was lowering how much data users would be able to download, to four gigabytes from 10. When users exceeded those limits, they would typically pay extra charges, which would raise the cost.

"They have actually increased the pricing to us and to the public while saying to the public they've decreased it. We can't accept that."

But Berry said the ISPs had the option of keeping their 10-gigabyte caps.

Ihug chief executive Mark Rushworth said Telecom would also not provide a guarantee on minimum speeds. That would mean the 3.5-megabit service could potentially slow to 24 kilobits a second at peak times, half the speed of dial-up.

Both ISPs were also concerned about contention ratios, which is a measurement of how many users can be on a given circuit at one time before experiencing significant slowdowns. Telecom would not specify what these would be, they said.

Berry would not say what the new contention rates would be.