Telecom claims it is suffering the effects of the hard times in the internet industry and is owed $20 million by internet service providers.
The telecommunications giant has accelerated its efforts to collect the money, half of which is overdue by 90 days or more.
Telecom was owed $22million by ISPs this time last year but it says the situation has taken a turn for the worse in the past six months, during which the amount it is owed has increased by $4 million, or 20 per cent.
New Zealand has about 85 ISPs, ranging from the dominant national players Xtra, Clearnet, ihug and Paradise, to regional providers Earthlight and PC Net.
What proportion of Telecom's revenue comes from ISPs is unclear, because Telecom does not separately report the figure.
Telecom's general manager of industry services, Greg McAlister, said Telecom had written off $1.5 million of debt since mid-1998 because of ISPs going into liquidation.
In the latest June year just under $1 million of Telecom's $32 million in bad debts was owed by its ISP customers.
Mr McAlister said that the situation was unlikely to improve any time soon.
He declined to name the ISPs that were significantly in debt to Telecom, but estimated that one in four of Telecom's ISP customers was having difficulty paying on time.
"If the industry does shake out the way it may appear, we're predicting that bad debt could balloon over the coming year.
"At the end of the day, if the ISPs aren't in a position to pay their current debt, let alone aged debt, we've really got to look at each other and decide what to do."
He said the departure of medium-sized ISPs Asia Online and Voyager had heightened the company's awareness and its risk assessment of the industry.
Tim Wood, a director of ihug, an internet service provider with 130,000 subscribers, said the company's payments were "currently up to date with Telecom".
Telecom's $20 million was probably a figure arrived at quickly that included outstanding payments from the ISPs that had fallen over.
"There are quite a lot of mid-tier ISPs of around 20,000 customers. It's not much in the telecommunications business where you're talking large numbers of customers."
