Unbundling "needs to be cheaper" - Orcon

State-owned telco Orcon has written an open letter to Commerce Commission chair Paula Rebstock to express concern about the price it might have to pay to put internet equipment in roadside cabinets that Telecom is installing across the country.

Chief executive Scott Bartlett told The Dominion Post that Telecom should be forced to provide access to Orcon and other competitors at below cost if that was the only way to keep competition in the telecommunications market alive.

State-owned enterprise Kordia bought Orcon for $23.4 million in 2007 to lead its push into the retail telecommunications market.

Mr Bartlett said there was a very real risk that Orcon and companies like it would be "precluded from investing any further in the New Zealand broadband market''.

Telecom's cabinets will connect about half of homes in the major centres within the next two years, with other customers served from exchanges. It is making the investment as part of an agreement struck with the former Government to shorten copper phone lines and improve broadband performance.

The commission has yet to decide how much Telecom should be allowed to charge competitors to install their equipment in the cabinets and provide "backhaul'' connections.

Mr Bartlett feared the commission would base its decision on unaudited accounts supplied by Telecom.

Telecom had proposed fixed charges of $600 to house equipment in a cabinet, $1000 per access seeker for backhaul and a charge of $130 per customer connected, he said. That was in addition to a monthly rental for copper phone lines to customers' premises.

Mr Bartlett disputed Telecom's costs, but said that even if the commission accepted they were genuine, it should set lower prices.

"The draft pricing we are looking at would suggest a brand like Orcon, Vodafone or TelstraClear would need to be at around 40 per cent market share to make this work.''

Investments Orcon had already made installing equipment in "unbundled'' exchanges in Auckland and central Wellington would not be undermined, but there was a risk the equipment would have to be "grandfathered'' and that Orcon would need to return to wholesaling Telecom's services, he said. "That is the future we are fearful of, where no-one has infrastructure other than Telecom.''

A Commerce Commission spokeswoman said the commission had engaged in extensive consultations with the industry and its proposed approach to pricing was based on ''a combination of costs and international benchmarking''.

All submissions would be considered on their merits. ''It should be stressed that prices ... have not been finalised and are still under active consideration.''