Telecom's broadband cut 'overdue'

Telecom's ace card of cheaper, faster internet will not be enough to stave off Government action on broadband, Communications Minister David Cunliffe indicated yesterday.

"It's a step in the right direction and not before time," Cunliffe said. "But there remain some significant open questions to the pace of change relative to our international benchmarks. Therefore, we are still going to be carefully considering broadband issues as part of the regulatory stocktake."

Telecom's play came on the eve of Parliament reconvening and after comments by Prime Minister Helen Clark that she plans to stress the need to boost poor broadband uptake.

Telecom's new broadband deal, announced yesterday, will in April launch new broadband services with a download speed of 3.5 megabits per second, an increase from the 2-megabit top-speed now available.

Telecom is also boosting upload speeds - necessary for uses such as website maintenance and playing video games online - with a new 512 kilobit service joining its present offering of 128 kilobits.

Prices will range from $29.95 a month to $149.95, with the top-end service - aimed at small- and medium-sized companies - representing a significant cut in the cost of business broadband. Telecom's previous top-end business broadband service cost nearly $900 a month, the second-most expensive in the OECD.

Cunliffe plans to conclude a regulatory review by the middle of the year and options include the opening up of Telecom's network to rivals or full structural separation.

He would not say what sort of action from Telecom would be necessary to avert Government intervention.

"I think it's really important with decisions of this magnitude that the process itself is good and has integrity, and that's what I'm concentrating on. I can't, as much I'd like to, give you a one-line answer."

Ernie Newman, chief executive of the Telecommunications Users Association, welcomed Telecom's price cuts and said they would move New Zealand "closer to where we need to be".

However, he said the move was "manipulative" in that it put other internet service providers, who wholesale Telecom's broadband services, between a rock and a hard place.

The ISPs are considering a wholesale proposal that offers similar terms, but they now have little choice but to accept them. Otherwise, they risk losing customers to Telecom by selling inferior products.

"They are the victims of a regulatory system that has proved to be too light-handed and too open to regulatory gaming by the incumbent," Newman said.

The Commerce Commission in December granted TelstraClear wholesale terms that would have seen speeds of up to 7.6 megabits come online.

But Telecom threatened a legal challenge to that decision, so TelstraClear last month accepted a 3.5 megabit service rather than risk further delays in coming to market.

Slingshot and ihug, two of the nation's largest ISPs, were undecided yesterday about whether they would accept Telecom's wholesale terms.

"It's a really average offer," said Slingshot founder Annette Presley.

Number-four player Orcon said it would accept the terms, but general manager of regulatory affairs Scott Bartlett said they were "mediocre at best".