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Police said the problem appeared to be confined to the Auckland area, and Telecom was working on the problem.

National Radio reported the 111 system went down at around 3.30am.

Telecom spokesman Mark Watts said the problem may be intermittent and some 111 callers may be able to get through.

He said Telecom was taking the issue very seriously and trying to fix the problem as quickly as possible.

He told National Radio this morning today’s problem was not related to the XT network but affected callers on all networks on landlines and mobiles.

National Radio reported callers have been getting a range of responses including an engaged signal and no signal at all.

It reported that police were still having trouble with the system at 7am.

Anyone who was unable to reach police by calling 111 should call their local police station or (09) 571 2800 and their call would be forwarded to emergency services.

Telecom is required by law to provide emergency calling on its fixed network. However, mobile phones are not covered.

The government has branded the network problems as “terribly embarrassing” and has asked for an urgent report on the fault.

Communications Minister Steven Joyce has warned he is prepared to regulate cellphone companies to ensure 111 calls are a priority when networks fail.

The latest network failure has resulted in a second scalp. Telecom’s second highest-ranking executive resigned yesterday.

Telecom has offered disgruntled customers south of Taupo a $10 million compensation package. It follows a $5 million payout at the start of the month.

It also vowed to try to keep customers, saying it would talk directly to each one who wanted to jump ship to other providers.

Ben Verwaayen, global chief executive of Alcatel-Lucent, which built Telecom’s XT network, said from New York yesterday that the problems in New Zealand had never been seen before.

“Apparently there are things in New Zealand that are really specific and we need to understand that better than we have done. It is our responsibility to make sure we rectify the situation as quickly as possible.”

The company had used the same technology in other countries successfully, he said. A team of experts was on its way to New Zealand, but was “not the cavalry”.

“I apologise to the customers of the network. They have the right to expect a flawless service — that is what they are paying for. We have let Telecom … down on that and we are going to make sure we rectify it.”

Telecom chief executive Paul Reynolds said saying “sorry” was not good enough.

“Actions have to speak louder than words. They’re [Alcatel] on notice because it has to get fixed. This works well in the rest of the world. We want to know why it doesn’t [work] in New Zealand.”

As compensation XT customers south of Taupo will save 33 percent on their monthly plans for three months. Pre-paid customers will get a 33 percent bonus when they top up. Business customers will be offered a 50 percent credit.

The latest fault exposed a glitch in 111 cellphone coverage that left some customers unable to make emergency calls, including one trying to report a serious attack.