Telecom's fast net service runs into strife

By PAUL BRISLEN

Telecom's wholesale high-speed internet service is in doubt just days before internet service providers start selling it to their customers.

The internet service providers say they now see little point in promoting the service because a Telecom retail offer launched on Friday will be difficult to beat.

One internet provider asked: "Why would we lock customers into the wholesale regime if Telecom can change the rules and offer a much better retail service over the top of us?"

The stoush is the latest in a series of disputes over wholesale high-speed internet access.

Telecom launched its wholesale product in June and internet service providers (ISPs) have since been working towards offering their own products using the service.

The so-called "unbundled bitstream service" offers ISPs the ability to tailor the products to suit their own customer base.

The service is limited to a download speed of 256 kbps (kilobits per second), but the ISPs have been building in their own services to offer something different to the market.

But, on Friday, Telecom said it would be offering new plans at the much faster speeds of 1 mbps (megabit per second) and 2 mbps.

These plans are not available as part of the bitstream agreement but can be offered unchanged by ISPs on a reseller basis.

Documents obtained by the Herald show the resale margin offered to ISPs on faster services is so low as to be unworkable.

The entry level plan includes a margin of just 12c a customer a month. The fastest plan includes a margin of $17.72 a customer a month.

Auckland-based provider Orcon has been aggressively marketing its bitstream service, to be launched early next month.

Managing director Seeby Woodhouse said he had written to Telecom asking for an explanation of the new products.

"It's a return to the bad old days where we just resell Telecom's service for a small margin," he said. "It's not the wholesale regime we were expecting. Telecom's killed that off before we even got started."

Ihug general manager Guy Nelson said he was disappointed by Telecom's attitude.

"If they can do 256 kbps on the bitstream service why can't they offer 1 mbps and 2 mbps?" he asked.

Nelson said he was glad to see Telecom finally offering more in the way of fast internet services to customers.

But the industry standard would be to offer a true wholesale service at the same time as a retail service.

Auckland provider Iconz is no longer considering signing the wholesale agreement with Telecom, says strategy and operations manager Jenny Longhurst.

"I'm uncertain about signing such an agreement when Telecom can keep changing the rules like that."


Telecom's online marketing manager, Chris Thompson, said Telecom had signalled the launch of similar plans under the bitstream wholesale regime for some time next year.

"The delivery cycle on [bitstream] plans takes time so we're bringing these plans to market and making them available at resale to other ISPs as well," Thompson said.

Telecom was not technically able to deliver those new services on the bitstream wholesale plan today.

"Resale is a solution that lets us provide a faster solution for customers and also for ISPs until those other [bitstream] services are available," he said.

Telecom's new faster plans go on sale on October 24.

Planning ahead

* Telecom's wholesale plans will be launched this week.

* Wholesale plans are based on 256 kbps speed.

* Telecom's new retail plans run at 1 mbps and 2 mbps.

* Telecom's new plans are not available as wholesale until mid- 2005.