When is a freeloader not a freeloader? When it's you

By CHRIS BARTON

While Telecom labels Clear and free internet provider i4free "freeloaders" for collecting termination payments for internet calls in New Zealand, Telecom itself is not averse to freeloading off Telstra in Australia.

There, Telecom collects the same type of interconnect charges, arguing that the payments are justified.

The about-face emerged at a round-table discussion with the Australian Competition and Consumers Commission where Australian carriers met to thrash out how to price termination charges when local calls pass from one telco's network to another.

Included in the meeting was Telecom's Australian subsidiary, AAPT, which argued that the "call sinks" created by internet providers receiving large numbers of calls on its network were because interconnect charges were too high.

"One of the reasons the ISP problem arises as a customer type that entrants want to serve is because the termination charges have been set high, and if they were low charges this would not be such an attractive target," said Dr Nina Cornell, AAPT consultant.

The problem Dr Cornell was referring to is the same problem that caused Telecom chief executive Theresa Gattung to call Clear and i4free "freeloaders" because they were attracting long duration internet calls on to Clear's network and gathering an imbalance in termination payments.

In New Zealand, where there is no market regulator, Telecom has an agreement with Clear to pay it a net of 1.5c a minute when calls pass to its network.

Clear pays Telecom 3c a minute when calls go the other way.

The Australian commission acts as a regulator for the telecommunications market and has just forced Telstra to reduce its interconnect rate to 1.8Ac a minute this year and 1.5Ac a minute the following year.

Dr Cornell's argument for AAPT, as a new entrant trying to develop its business in an environment where Telstra is the incumbent carrier, is almost identical to that of Clear -- when a firm makes a significant investment in installing a fibre network it will naturally compete in any way it can to get companies to use that fibre.

Other industry leaders have argued that the ISP problem is transitory and likely to disappear when the local loop -- the "last mile" between Telstra's local exchanges and consumers' homes -- is opened up to other Australian carriers in August.

New Zealand has yet to make a decision on opening the local loop to competition, but the scenario has carriers vying for the home consumer by offering a bundle of phone and fast internet services.

When they win that business they connect directly to the consumer's copper telephone wire at the local exchange and pay Telstra a monthly sum to compensate it for the loss of that business, and for the ongoing maintenance of the last mile of copper.