KEY POINTS:
More than a dollar has been knocked off the price Telecom can charge rival companies to access its broadband network following an announcement by the Commerce Commission yesterday.
The price drop - to $26.35 per customer per month, down from $27.55 - comes after internet companies ihug and
CallPlus complained to the commission last year when Telecom's introduction of "Unleashed" broadband plans made its retail prices cheaper than those offered to wholesale customers.
Yesterday's decision by the commission also backdates lower prices to last October.
Ihug chief executive Mark Rushworth said the decision was disappointing, with the company expecting a price of around $23.
He said the small broadband margins - ihug would make 27 cents on low-end broadband plans - act as a disincentive to providing broadband services.
Rushworth said: "It's an odd signal to send out when we thought the Government's key driver ... was to increase broadband uptake in New Zealand.
"We should be thankful we've seen almost a dollar come off the price but it doesn't take broadband as a product out of the red yet, it's still a loss maker, and we can only hope some sense prevails when setting the price for local loop unbundling."
The Commerce Commission is considering prices for local loop unbundling - what phone companies will pay to access Telecom's network - and are expected to make decisions on pricing a range of wholesale services before the end of the year.
Callplus, the other complainant to the commission, was more circumspect about the decision.
Head of wholesale Graham Walmsley said although CallPlus was expecting a price closer to $23, "overall a win's a win".
"The commission did accept that what Telecom had done had changed the market. The pricing model, which essentially Telecom had gamed, had inadequacies," Walmsley said.
He said the company was now looking forward to the introduction of local loop unbundling and naked DSL - broadband without the need for a phone line rental - which will supersede the current wholesale broadband service.
"We're now into the next phase," said Walmsley.
"It's a small win - we'd hoped for a bigger one - it's a small win, we'll take it in that light. Most of the ISPs aren't making a buck out of selling broadband right now and are looking for LLU and some of those things to solve that issue."
Telecom Wholesale spokeswoman Melanie Marshall said the company was pleased the commission's pricing decision had been released.
"We are passing on the new price as well as the backdating ... on to all our wholesale customers.
"So it's not just CallPlus and ihug that will get it, everyone will get it."
She said passing the pricing on to all Telecom Wholesale customers came at a substantial financial cost to its business, but the company believed it was the right thing to do.
Marshall said although Telecom would begin offering new wholesale services to its phone and internet company customers, there was likely to be an overlap. Telecom shares closed down 2c to $4.63 yesterday.
The decision
* The Commerce Commission has told Telecom it needs to drop prices paid by its wholesale customers to access its broadband network.
* Internet companies CallPlus and ihug complained to the commission last year when Telecom's retail broadband prices were lower than those paid by wholesale customers.
* Telecom has said the new price will be passed on to all its wholesale customers, not just CallPlus and ihug.