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Telecom NZ proposes 2c/min Modem Tax
Alastair Johnson writes "Telecom New Zealand is proposing a 2c/min "modem tax" for all residential customers. NZ traditionally has free residential local calling (part of government requirements from Telecom). Telecom is hoping to get around this by getting all ISPs to get an 0867 number for which their clients can dial without the 2c/min tax, but the 0867 numbers get less priority on the exchanges.
Check out the anti-0867 petition at Digital Edge.
" The information page essentially says that Telecom will (post-August) allow the first 10 hours per month to be free, but a 2 cent/minute charge to all residential numbers calling 0867. Update: 06/13 10:17 by H : Mea Culpa-I misread, and misunderstood. Click below for a clarification from Gromit:
Actually, what is says is that ISPs (*other* than Telecom) will have to offer
0867
numbers which will be free to call by residential users, but anyone dialling
NON-0867 (i.e. local) ISP numbers will be charged 2c/min after 10 hours. In
other
words, a residential number dialling a local number will get a 2c/min charge
(incidentally this goes against the deal the govt has with Telecom.)
From the mid/late 70s through to 1984 the NZ government borrowed large amounts of money to put into industrial projects, and we had a very closed and regulated economy. From 1984 onwards things swung the other way: government departments became State Owned Enterprises, with many of them not being state owned for much longer, and we have the least tarriffs for imports and subsidies for exports in the world.
One of the companies that was sold was Telecom, and one of the conditions of sale was that there would always be free local residential (as opposed to business) calls, and there were limits on how fast the cost of the monthly line rental could be raised. Businesses pay for their calls of course. ISDN is only available to business, and like leased lines is extremely expensive.
At the time it was sold it was considered by many to be the most advanced telecommunications network in the world. Since then their has been very little further investment in the infrastructure, and the network is now way behind the times.
Telecom are the most profitable company in NZ, and makes a lot more money than is considered normal for a telecommunications company of it's size.
A large part of the reason for their profitability is that they are the dominant player and that there is very little regulation in their sector.
At one stage our Treasury produced a report that suggested that as Telecom had responibilities that their new competitors didn't (eg emergency calls) they should be compensated for any loss of profits resulting from competition. The way that this would work was that their competitors would pay them the difference between the profit that Telecom made and the profit that Telecom would have made without competition. Fortunately this didn't go very far. Unfortunately there has been no progress made on things like number portability and Telecom are able to dictate terms on deals for interconnections.
One of the baby bells (or was it two of them in partnership?) set up a company here (Bellsouth, which has since been sold to Vodaphone) to do mobile phones. The man they sent out to run it was asked by a reporter if he would be using similar tactics to Telecom if he were back home (I forget which part of the USA) where the parent company had similar market dominance, and he replied that if he tried he would be sent to jail.
While I'm definate opposed to the idea of telecom trying to tax NZ net access, I would like to point out that it appears that the petitioners legal stance is slighly off. They state that telecoms actions are contrary to the Kiwi Share agreement which they quote the important part being:
"Local Call Charging - A local free-calling option will be maintained for all residential customers. Telecom may, however, develop optional tariff packages which entail local call charges for those who elect them, as an alternative."
While I'm no legal scholor it appears as if telecom has provided them with an Option in which they can call for free. And an additional tarriff, if the customer wants a higher priority line. While its sad that they would choose to single out data lines for such treatment, it doesn't appear nessesary against the agreement.
Any thoughts?
This is how it looks to me..
1. Telecom introduced a flat rate to its ISP, Xtra . As a means of killing off the rest of the ISP's that have had flat rates for years. eg, iHUG, Sinesurf etc..
2. They then complain that their exchanges are overloaded with all the extra traffic all the other ISP's are causing. Given that they are the largest ISP in the country. They shoot themselves in the foot by going flat rate. And now they want a way to make money out of it.
Pretty straight forward to me.. Although there's more to it than that. And this article in the New Zealand Herald is worth a read if you're intrested: Telecom spurs Internet rage .
--- "If a man speaks in a forest, and no woman hears him, is he still wrong?"
I don't think Telecom want to restrict net access; they just want their ISP, Xtra, to become the dominant ISP, and the easiest way of acheiving that is to force all the other ISPs out of the market via net taxes and predatory pricing. (If you read this you'll see that Telecom's ISP, Xtra, is exempt from the charges).
To say they are 'exempt' is mis-leading. They use another special number (0873) which is 'IPNet' a service that allows ISPs to make use of 'communial' modem pools the traffic is then routed through that ISP's network.
The thing is however that there is no effective way for ISPs to control access to these lines (kicks are near impossible) -Meaning that people can multi-login with one login and password on a flat-rate account. making them ineffective for providing nationwide access.
However it is understood that Telecom allows their ISP Xtra to have calls to that IPNet number to be routed to local modem pools. This is not a service that is available to other ISPs - If they wanted to play on the same field as Xtra they would have to base themselves entirely on IPNet, then they are at Telecom's mercy when it comes to expansion of service. Some ISPs make extensive use of this in areas they can't offer a local numbers, but it has a reputation of being hard to connect to.
It's basically _way_ unfair competition... there are a number of issues like this in the NZ telecommunications industry at the moment, and a major problem is that the Minister of Communications and the Commerce Commission are completely ball-less and won't doing anything to keep Telecom in check.
When a company (in New Zealand) is paying in excess of NZ$400 million a year in taxes you can understand the government's reluctance to get nasty.
The (in my opinion) biggest motivating factor in this move is to avoid interconnection fees. Currently Telecom is paying other local carriers a per minute fee for calls that originate on Telecom's network (about 99% of residental lines) and terminate on other carriers network. However for other carriers to offer the 'Internet Numbers' to their ISP customers they will likely not be able to charge those interconnect fees. That is a loss to those carriers of millions of dollars a month, however if they don't accept it then anyone calling ISPs on their network will be subject to the 'Telecom Net Tax'.
The ironic part is the fact that Telecom's ISP, Xtra recently moved (as in 2 weeks ago) from a time-based charging system to flat-rate, so "New Zealanders could spend more time online," only to turn around a week and a half later and blame Net usage on the problems with it's network.
That's all.
Just curious if your running a free bulletin board, how does the NZ government find out that your running it? do you have to report this kinda thing? What happends to you when you don't?
For those of you outside New Zealand who are looking at this, a bit of background might be in order to see what the outrage is about.
In 1990, the Governemnt sold Telecom for NZ$4.25 billion to a mostly American Consortium. They didn't just sell the service - they actually sold the whole network.
As a condition of sale, the Government retained a "Kiwi Share" in Telecom which placed certain obligations on the corporation. These were (interestingly enough, a brief search on www.telecom.co.nz didn't find this info, so I had to look elsewhere):
1.That the purchasers would sell down a portion of the initial holding to the New Zealand public,
2.That there would be a 49.9% ceiling on the shareholding of any foreign buyer,
3.That the Board would comprise at least 50% New Zealand citizens,
4.That Telecom would maintain a comprehensive residential phone network, with free local calls and increases in the line rental limited to the rate of inflation,
5.That the line rental for rural residential phones would be no more than for urban ones.
I could go into a whole lot of stuff about how the government had promised that they wouldn't sell Telecom, and how it was underpriced, but there is some more info I found here:
http://www.plain.co.nz/bohica/tele_2.HTM
Anyway, Telecom since then has been trying to work its way around some of this. Telecom executives frequently complain how much the rural and free local calling services are costing it. A while ago it introduced a 'plan' where by paying for local calls, you had a lower monthly rental. I _hope_ that this isn't the prelude to trying to get us all onto local charging.
Telecom has also been making very large profits, so it has had ample opportunity to upgrade its netwrok if this was going to be a problem.
So the question is not really about the pros and cons of charging people who make massive use of phone lines (I could see some case being made for this) - it is about meeting obligations which it is quite capable of meeting.
Roy Ward.