Telecom NZ taken to court for, allegedly, breaching separation rules

By Stuart Corner
Friday, 06 November 2009 10:23

Government Tech Policy

New Zealand's Commerce Commission has accused Telecom New Zealand's Wholesale business unit of breaching its separation undertakings by discriminating between service providers.

The Commission has initiated proceedings in the High Court against Telecom NZ alleging that three separate loyalty offers made by the Wholesale unit between December 2008 and July 2009 were likely to have breached the no-discrimination rules and "have the potential to seriously harm competition in telecommunications markets and undermine or deter efficient investment in telecommunications infrastructure."

The Commission is seeking remedial orders and/or monetary penalties, and the issue has the potential to be very costly for Telecom The High Court can impose penalties of up to $NZ10 million for each breach.

While neither side is giving any details of the conduct in question, comments from both sides suggest that this question of 'discrimination' is a very grey area and the confrontation could be foretaste of what is in store for Australia if and when the proposed wholesale/retail separation of Telstra is achieved.

Telecom NZ described the Commission's action as "an utterly disproportionate response to an inherently uncertain area." Tristan Gilbertson, group general counsel, said: "On receiving complaints in April, we spoke to the telecommunications branch of the Commission, but received no guidance or indication of concerns under the undertakings. In fact, earlier published reports in February indicated that the Commission did not have any concerns with the offers."

He added: "Telecom Wholesale initiated the offers as a good faith competitive response to customer demand. We felt then, and still feel now, that the offers were consistent with the spirit of the Undertakings."

The Commission, however indicated that its legal action had been initiated not in response to those earlier complaints but following a more formal assessment. Although it acknowledged that it had "received ... complaints on the matter," it said: "[Our] action follows receipt in August of the Independent Oversight Group's (IOG) findings that Telecom Wholesale's loyalty offers constituted a breach of the undertakings."

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