Slingshot plays Big-Brother
Thanks for pointing this out to us. This clause was originally given to us by our lawers to cover the scenario where search warrants are served on us. This could occur if the Police or Internal Affairs suspect one of our customers is performing illegal activities using our network.

As you'll be aware, in these matters we have no choice but to hand over login details, phone numbers etc.. that we may have on record.

Because of Clear's surprise action Slingshot.co.nz was launched in a condensed timeframe and we hadn't picked up on the implications of the wording of the clause until you pointed it out. We thank you for that and will modify our terms and conditions to more accurately reflect our original intention.

Can we pull it off (Slingshot at $14.95)?
Here's why we can:

• We have invested heavily to highly automate many parts of the business that others are still performing manually. Through our experience with i4free we've been highly focused on optimizing our operational support systems to the point where the whole provisioning and billing process is entirely database driven, with no human intervention. It is our understanding that each of the three ISPs you mention still spend heavily on personnel in those areas.
• Because of the level of automation we've achieved in the operational support of the ISP business, our highest cost element per customer is international bandwidth. Attica has committed to substantial Southern Cross capacity, which we will both wholesale to other service providers and use to support our other business-focused lines of business. That means we have an extraordinary ability to achieve cost efficiency in our most significant cost line item.
• We have an absolute focus on where we spend our money: only on items relevent to the speed, reliability and constant availability of our service (that's why we guarantee it). In fact, we challange all other ISP's to provide the same reliability guarentee (although this may have cost some of the other large ISPs you mentioned a lot of money over the last few months)
• We have a very detailed understanding of our costs -- from experience both with i4free and our other paid ISP services. I can assure you that Slingshot is more than adequately profitable at $14.95 per month.

Discussions between Clear and Telecom
You're right about the bottom line focus. That's what drives Clear to work with us on these issues. If we get interconnect revenue they take their cut.

You say that "Telecom and Clear finally sat around a table and agreed to come to terms over the vexatious issue of Internet interconnect." Presumably you are referring to their "relationship package" announced in early October.

In fact, we have been working with Clear since then on arrangements which they committed to us would see the continuance of Interconnect revenue for a substantial period into the future (and probably long enough for the new telecommunications legislation to have effect which would require Telecom to continue paying Interconnect revenue, as they should). However, Clear sent us a letter on the last working day before Christmas which advised that the arrangements they had suggested (and which we had allocated substantial resource to pursuing) were suddenly no longer available.

The move appeared to be carefully timed to do maximum damage to our company -- fortunately our staff pulled together and several gave up their holiday plans to accelerate the launch of Slingshot.co.nz and reengineer the network to ensure that it was optimally configured under the unexpected new rules.

Fortunately i4free is only one part of our overall business and we have the financial strength to comfortably survive such challenges. However, it continues to astound me the lack of business ethics displayed by both Clear and Telecom and I am certainly looking forward to a better regulated telecommunications environment which will ensure the level of innovation that New Zealanders deserve.

Interconnect Revenue
I think its also worth sharing my views on Interconnect Revenue. It is reasonable to expect that in the medium term ISPs (both free and paid) will receive Interconnect Revenue from the carrier originating the telephone call.

This occurs in nearlly all other developed countries with privatized telecommunications environments. This fact was clearly documented in the Goverment Telecommunications Enquiry led by Hugh Fletcher which recommended that Interconnect Revenue be required. That aspect of the reports recommendations has been accepted by government and will be enforced by a new body under the Commerce Commision. The requirement is that Telecom must compensate us for the termination of calls at cost. We expect that this will be similar to the amount we recieved prior to the end of December (after other carriers involved took their slice).

I4free will be approaching Telecom soon to interconnect directly with them using these new rules although we believe this will be a lengthy process.

Telecom would argue that the reason they should not pay interconnect revenue to other carriers in relation to ISP dial products is because they do not charge for local calls. This is a complete joke because Telecom charge $37.50 for basic line rental alone, well above what other carriers charge internationally.

For example, customers of Telstra in Australia pay A$12.00 for line rental and around 20c per call. The average Australian would pay less overall per month.

What this means is that we don't have free local calls in New Zealand but a flat rate local call and line rental bundle. If Telecom were really so hard-done-by in providing free local calls and service why would Telstra and others be rolling out local loop to homes all over NZ right now?

The other part of this is that Telecom actually save money by terminating calls on our network (calls to us are over one group of pipes vs regular calls which are switched to individual phones on different exchanges all over the country). Many Internet customers also purchase second lines from Telecom or upgrade to ADSL based on demand which we create for Telecom and which Telecom recieve additional revenues for.

These are some of the reasons why the ministerial enquiry stated that Telecom must pay interconnect revenue using internationally accepted costs as a measure (a recommendation which the government has accepted).

Your headline
Your headline is i4free becomes i4aMonthlySubscription. We wish to emphasize that Slingshot.co.nz is a separate service to i4free. i4free will continue to operate, though the resources we allocate to the service will be reduced.

It is our belief that i4free provided a better quality service than the other free ISPs because it allocated more resources per customer. What's more, we don't believe that we're alone in reducing the resources per customer allocated to our free service. We're just being open about it.

i4free is still completely operational and it is still being actively used by our subscribers. We are merely suggesting that if people find the level of service provided by free service providers to be frustrating that they take up the Slingshot.co.nz alternative instead -- and the feedback we've got so far has been very positive.

Thanks for your comments. I hope this e-mail has clarified some points that may not have been obvious from the press release.

Kind Regards,
Wayne Toddun
Attica Communications Limited