ISP complaint to Commerce Commission

PlaNet Communications,
PO Box 6594,
Auckland 1
Tel (09) 813-0088  Fax (09) 818-3141

Commerce Commission,
PO Box 2351,
Wellington.

Dear Sirs,

I submit that Telecom (NZ) Ltd is conducting unfair business practise in respect of two actions:

1.   The pricing of  Telecom's Xtra Internet service to users outside the local call areas Auckland,
Wellington and Christchurch is below what any other Internet Service Provider can supply
because Telecom are supplying 0800 number services to a division of their own company
at a price lower than they will supply to other companies that have no option but to use
Telecom's 0800 number services.   This is a case of predatory pricing and unfair use of a
monopoly position to prevent competitors supplying Internet access to users outside main
centres.

2. The pricing of Telecom's Xtra Internet service to users in New Zealand is below what is required
to cover costs for providing that service and is an example of predatory pricing and unfair use of
a monopoly position to undercut competitors in the Internet Services Provision market.
As the owner of PlaNet Communications I have been supplying Internet Services using Telecom (NZ) Ltd
as a supplyer of analogue phone lines and DDS (digital data services) since Nov 1992.   I have been talking to
my Telecom Account Manager Trevor Wallace for over 18 months about DDS and 0800 number services in an
effort to supply Internet Services to users outside Auckland at a price that is not more than double
what users in Auckland pay.  I have established a co-operative of Internet Service Providers and together
we supply free-call-zone connections to the Internet in Whangarei, Auckland, Hamilton, Tauranga, Gisborne,
Kapiti Coast, Wellington, Blenheim and Christchurch - under the name PlaNet FreeNZ.  The rates on DDS
circuits (used to connect the above centres into our network) and 0800 number access for users outside the
above centres, as of the last discussion 4 working days ago, would require users to pay the following charges
for Internet access.

The figures below are for an average PlaNet FreeNZ operation in a medium sized town with 200 users and
would only cover the telecommunications charges, not hardware, labour, rent, energy etc costs.  It is assumed
that most calls will be in the 6pm - 12pm time-zone.

Within Free Call Zone  0800 Regional Call  0800 Border Call
PlaNet  Telecom  PlaNet  Telecom  PlaNet  Telecom
$4/hr  $2.50/hr  $8.98/hr  $4.95/hr  $11.96/hr $4.95/hr

The major component of the above charges to PlaNet FreeNZ are the DDS charges to link the town into
our national network and the 0800 charges - both these are paid to Telecom at the following rates with
all possible concessions so far negotiated for volume etc built in.  It is assumed that the DDS link is
64Kb to our router in either Auckland or Hamilton and that 0800 calls are not made during business hours -
although of course many would be.

Within Free Call Zone  0800 Regional Call  0800 Border Call
PlaNet  Telecom  PlaNet  Telecom  PlaNet  Telecom
$616/mnth ??  $1300/mnth ???  $1300/mnth
0800 \plain\f3\fs20 $0/hr  ??  $4.98/hr  ???  $8.96/hr  ???

I have been supplying Internet for nearly 4 years and because of the cooperative nature of our network
we are able to purchase high level equipment and negotiate with all our suppliers, including Telecom, from a
position of bulk orders.  We currently use Sun, Cisco and Spider equipment and we know that we have been
innovators in establishing new computer/routing/networking hardware and software.  Telecom's Xtra services
are less than 6 months old and we believe are not more technically efficient than our systems.  This is clearly
indicated by the fact that Telecom technical personnel have come to us on more than 3 occassions for help
in establishing their Internet presence.  We have good reason to believe that we are more efficient than Telecom
in the Internet Services market and have lower overheads and an established user base.

The only explanation that I can offer for Telecom being able to suply Internet services via Xtra at the prices
quoted above is that Telecom (NZ) Ltd are taking a loss on their Xtra services in order to unfairly compete
in the Internet market using their monopoly supply of DDS and 0800 (coverage) to drive out what they seem to
perceive as their competition.  This, despite the fact that every new customer to our network ends up paying
over 70% of their charges to Telecom.  In essence we act as a revenue collecting agency for Telecom.

Telecom may offer the reasoning that their low DDS and 0800 charges for supply to Xtra are due to the high
volumes and large network coverage that Xtra/Telecom can command.  I believe that such reasoning is flawed.
The Xtra service is new, how can it command high volumes at this early stage before its customer base is large
enough to justify such low costs?  Secondly the coverage that Telecom has, if used as a way of charging itself
low costs for trunk (DDS) connections is an unfair use of an existing monopoly position to supply services
internally that it will not supply at the same or similar rates externally unless the applicant for services is
ALREADY the size of Telecom.  This double bind of small business is being cynically manipulated by Telecom's
monopoly position against the interests of fair competition and supply of Internet services to New Zealanders
by local Internet Service Providers.

Telecom's Xtra service is anti-competitive, discriminatory against people outside main centres and predatory in
the Internet Services marketplace.  I request that The Commerce Commission investigate the Xtra Internet
Service pricing and costing and Telecom's pricing of DDS (trunk) digital services to itself and to outside
companies and if Telecom is found to breach the provisions of fair trade that The Commerce Commission
require Telecom (NZ) Ltd adjust its pricing and costing to accord with a lawful position in respect of fair
trade and fair business practise in New Zealand.




Alan Marston
Owner, PlaNet Communications