Misleading broadband ads cost Telecom NZ almost $NZ10m

Stuart Corner
Monday, 07 December 2009 11:21

IT Policy - Government Tech Policy

Telecom NZ has been fined $500,000 for misleading broadband ads, and has already paid $NZ8.4 in compensation to customers who signed up in response to the advertising.


Telecom New Zealand Limited has pleaded guilty to 17 charges of breaching the Fair Trading Act over claims made in 2006 when promoting Xtra's Go Large broadband plan, and has been fined $NZ500,000 in the Auckland District Court.

According to the Commerce Commission, which brought the action against Telecom, "From August to November 2006 Telecom and its ISP Xtra undertook an extensive nationwide advertising campaign to promote the 'Go Large' broadband plan and made a number of representations, including 'Xtra Broadband is about to be unleashed!', 'unlimited data usage and all the internet you can handle' and 'maximum speed internet'.

In December 2006 the Commerce Commission launched an investigation following complaints from Xtra customers who found that the Internet speed was constrained, in some cases to dial-up speed. Some customers also found that they experienced slower speeds on their new Go Large plan than on their previous plans.

According to the Commission, "The overall impression of the campaign was that the Go Large plan was unique in that it would offer unconstrained faster speeds and no data caps. However further details available in the fine print of advertising and on Telecom's website gave the disclaimer 'as fast as a user's line will allow' and outlined the possibility of constraints which included a 'traffic management policy' for use during peak times and for those using peer-to-peer applications, such as downloading music and movies.

In addition, the Commission established that a change made in early December 2006 meant that the traffic management policy applied at all times and across all applications, not just to peer-to-peer traffic.

Graham Gill, Commerce Commission Fair Trading Manager, Auckland, said: "Telecom has co-operated fully with the Commission's investigation and has voluntarily paid around $8.4 million in compensation to approximately 97,000 affected customers. Telecom will pay a further $44,000 in reparation to 1,700 eligible Go Large customers."

Commenting on the court's decision, TUANZ, CEO Ernie Newman, said the claims had been made during "A wild west phase in broadband advertising [when] everyone overstated their services. It was inexcusable, especially in a service that the customer cannot easily test for themselves. But it was in the heat of an extraordinary period of action."

He added: "Times have changed. In Telecom's case, so has management. Trust and integrity are now rated highly within their company... Telecom's Ralph Braham says in essence, they got it wrong but have learned. I believe him."