Telecom, Telstra deal sets the rules

By RICHARD BRADDELL

The ground-breaking interconnection deal between Telecom and Telstra Saturn is likely to be the template for agreements with other players, big and small.

"We hope so. We haven't put all this effort in just to do it with one carrier," said Richard Dammery, Telecom's general manager of access and transport.

"It wouldn't be our intention to differentiate on the bill-and-keep issue [zero pricing for local calls between networks], nor on the other pricing terms that are in the agreement."

Dr Dammery said Clear Communications, which is also renegotiating interconnection, had already been acquainted with Telecom's "template approach" and so the nature of the Telstra Saturn deal would come as no surprise.

The deal, which has an 18-month term, was kept deliberately short to allow for renegotiation to take account of the rapidly changing shape of the industry.

One of its hallmark features is that it has done away with interconnection charges on local calls between the two networks, so long as they do not fall within the definition of a call sink, which is a number that terminates 10 times more traffic than it generates.

Another feature is that because local calls are zero rated, there is no longer a payment for the so-called access deficit, the loss that Telecom says it incurs from its Kiwi share obligation to provide local free-calling in all localities.

But while the Telecom/Telstra Saturn pact removes the asymmetrical charging that has given rise to so much industry angst, Dr Dammery said the policy issue still remained of how local access deficit should be dealt with.

"In most of the places where an access deficit can be demonstrated through a regulatory focus, and that's what our new disclosure regulations are, then there would normally be a cost-sharing arrangement.

"We still have the ubiquitous network and the cost of that."

Dr Dammery believed that pricing terms would be similar in other interconnection agreements, whether carriers were big or small.

He said the document was much simpler than the 1996 agreement with Clear because wholesale services were now contained in a separate agreement.

"For us, it's obviously about lowering our unit costs of capacity and actually maximising the utilisation of our network."

Although Telecom has included a local access resale product in its wholesale services agreement, Dr Dammery said it was an area where Telecom had pulled its punches "a wee bit" as it waited to see what the Government did in response to the telecommunications inquiry.

Toll bypass pricing, or the charges for transporting other carriers' long-distance calls through the so-called last mile, was another area where Telecom had held back.