Telecom 'abusing its power'

By CHRIS BARTON

Telephone company WorldxChange is accusing Telecom of anti-competitive behaviour.

It says the behaviour is siphoning off about $15,000 a day, and has asked the Commerce Commission to intervene.

The dispute involves WorldxChange wanting to achieve savings - which it says would be passed on to customers - by routing its toll traffic over Clear's network instead of Telecom's.

WorldxChange operations manager Paul Clarkin says the company pays Telecom about $6 million a year in interconnect revenue - a toll-gate type of payment of between 3c and 7c a minute for calls by WorldxChange customers that are carried over Telecom's network.

In late April, WorldxChange concluded an agreement with Clear to route its toll bypass calls, thereby denying Telecom of some of the interconnect revenue. Telecom would still get termination payments from Clear for the WorldxChange traffic, but at a much lower rate, thanks to a capped interconnection agreement struck between the two in October last year.

But Telecom is baulking at the changeover. Mr Clarkin says a letter from Telecom access and transport general manager Richard Dammery explicitly raises concerns about the "revenue implications" of allowing Clear to service WorldxChange.

"This is a clear case of Telecom abusing its power. We asked Clear to carry our calls because they offered us a better deal, but when we asked Telecom to switch the traffic over they refused," said Mr Clarkin.

Telecom was unavailable for comment.

Commission chairman John Belgrave confirmed that he had received the complaint on Friday and was looking into it.

The complaint has parallels with a bitter dispute that began in July 1999 between Clear and Telecom involving free internet provider i4free. It centred on a Telecom mandate that all internet access must be via an 0867 dialling prefix.

Telecom said the reason was to protect its network from being swamped by internet calls, but later admitted in the High Court that the decree had a second purpose, to prevent revenue losses from an imbalance in interconnect payments.

The matter is before the High Court as a result of an action brought by the commission and joined by i4free.

Clear was also part of the action, but settled with Telecom in October. Part of the settlement involved a fixed payment for 1.828 billion minutes of toll calls and 49 million minutes of mobile calls by Clear customers.

Also under the deal, Clear was to pay Telecom $35 million over a year as a lump-sum payment for all traffic types, replacing the previous per-minute interconnect payments.

Changes to the Telecommunications Act now before Parliament would provide for "designated" interconnection pricing to Telecom's network and the appointment of a Telecommunications Commissioner, who would have the authority to make an enforceable ruling in the case of disputes.

Mr Clarkin said Telecom had previously allowed two other companies, Newcall and Zip, to make the switch to Clear for their traffic.

Frustrated with Telecom's delaying tactics, Mr Clarkin said WorldxChange took the additional step of assigning its 0566 and 0569 access codes to Clear under the terms of the national number plan deed administered by M-Co.

Under that deal, Clear assumed all liability for traffic passed to those codes.

But Telecom was still refusing to make the switch, saying the code transfer would be complex and that there were other "issues."

WorldxChange employs 40 staff and has 40,000 customers in New Zealand. It is widely acknowledged as having played a key role in significantly reducing toll prices when it entered the market in 1997.

The company's submission to the commission says it can also be inferred that Telecom's actions are designed to have a highly negative impact on ongoing discussions of a management buy-out of WorldxChange, and thus threaten the continued existence of a leading competitor.

At the end of last month, I-Link Incorporated acquired the US and Canadian assets of WorldxChange Communications for $US15 million ($36.6 million).

Two weeks ago, the Australian arm of WorldxChange was sold to Perth company New Tel, reportedly for about $A11 million ($13.6 million).

Mr Clarkin said New Zealand's WorldxChange customers were unaffected because the company had alternative overseas carriers for its toll calls.