Xtra feels heat over pricing

, posted: 23-Sep-2003 21:59

Internet providers have criticised Telecom Xtra's revised residential broadband plans as anti-competitive because the price cut further reduces their already small margins for reselling the service.

On Friday, Xtra lowered prices by $10 a month for all Jetstream plans apart from the low-speed Jetstream Starter. But the price reduction comes entirely from the internet provider component.

Telecom will bill customers directly for most of the cost, leaving internet providers that resell the Jetstream
service with only $10 a month per Jetstream customer if they match Xtra's prices. Currently, the providers charge between $20 and $30 a month for Jetstream.

The existing Home 500 and Home 1000 full-speed plans now cost $59 and $79 a month respectively. Telecom bills customers $49 and $69 a month for each plan, with Xtra billing the additional $10.

Likewise, the new 256Kbps Jetstream Home 500, 1000 and 2000 plans cost $50, $60 and $70 - again with only $10 for each billed by Xtra.

Telecom Xtra's head of internet and online marketing, Chris Thompson, said internet providers had always been free to charge whatever they wanted on top of the Telecom component. He said internet providers that signed up Jetstream customers also received an unspecified commission.

TelstraClear's Muneeb Bhatti said the company would still match Telecom on price.

Commerce Commission spokeswoman Jackie Maitland said it was considering if there were any concerns under the anti-competitive behaviour provisions of the Commerce Act. It had not received any complaints.

Seeby Woodhouse, managing director of North Shore provider Orcon, said matching Xtra's $10 for residential Jetstream plans would not be a problem. But Woodhouse said it meant the company was "getting next to nothing" for providing the helpdesk, billing and support.

Woodhouse was also concerned that the smaller internet provider charge meant customers would sign with Xtra out of convenience, to have the entire Jetstream cost on a single bill.

Jenny Longhurst, sales manager at Iconz, told the Herald that its Jetstream users would be moved from the FastIP network, where the internet provider routes the data traffic, to the FastIP Direct network, on which Telecom manages the bandwidth.

It was the only way for Iconz to match Xtra's prices, but it regretted being forced by Telecom to do so.

Keith Davidson, president of InternetNZ, said it seemed that Telecom was trying to capture the entire Jetstream market. He added that "anyone who contacts Telecom wanting Jetstream will be offered a Telecom Xtra package and only if the person states that s/he wishes to continue with an existing ISP other than Xtra will Telecom acknowledge that there are suppliers other than Xtra".

This contrasted with Telecom's original promise to ISPs that it would maintain a neutral stance.

Other related posts:
The problem with VDSL2, part 2
The problem with VDSL2
The mysterious Dynamic Line Management on VDSL2

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