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Telecom - Source: Telecom -
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Telecom will have to pay $1.6 million to Vodafone and Orcon after reaching a settlement with the Commerce Commission over breaches by its Telecom Wholesale division.
Orcon said in response that the settlement goes a small way to redressing Telecom's efforts to stifle competition and delay investment in world class broadband.
"It sends a really strong signal to Telecom, don't get in the way of other people bringing competition, new technology and ultimately better broadband to our country....Telecom stood in the way of that for ten years and I think this is a really official signal of 'hey you can't do this anymore, get out of the way'," Orcon's Scott Bartlett said.
The settlement follows a commission investigation launched after complaints from the telecommunications industry alleging that Telecom Wholesale's 'loyalty offers' breached Telecom's Separation Undertakings.
Telecom's Undertakings are obligations set by the government that regulate how the telco operates.
The loyalty offers related to Telecom Wholesale's wholesale broadband service, which is used by competing service providers like Vodafone and Orcon to provide broadband service to retail customers.
Telecom offered substantial discounts in return for a commitment from service providers to maintain current and future customers on Telecom Wholesale's service rather than that of a competitor.
The Separation Undertakings require Telecom not to discriminate between or against its wholesale customers and the commission's investigation concluded that the loyalty offers were "likely to constitute breaches of the Undertakings".
The Independent Oversight Group (IOG), which oversees Telecom's compliance with the Undertakings and also investigated the issue, said in August 2009 that the loyalty offers were non-trivial breaches but Telecom Wholesale did withdraw all loyalty offers from the market following the decision.
"In the commission's view the loyalty offers were detrimental to investment in telecommunications infrastructure and undermined wholesale competition. Following the IOG's decision, Telecom withdrew the offers from the market. However, had Telecom not ceased the offers there would have been significant ongoing harm to competition in the telecommunications market," said Dr Ross Patterson, Telecommunications Commissioner.
Patterson says the settlement means that Vodafone and Orcon - who laid the complaints in August 2009 - have been compensated, and that further harm to the competitiveness of the market has been prevented.
He noted that the issue was serious enough for the commission to consider issuing proceedings but settlement avoids that.
"We are pleased to have worked constructively with Telecom to settle this issue. The settlement avoids potentially lengthy and expensive litigation," said Patterson.
Vodafone and Orcon will share the $1.6 million compensation equally and the settlement does not prevent anyone from seeking further compensation directly from Telecom the commission said.
As part of the settlement, Telecom has also been warned by the commission that it is likely that the loyalty offers amounted to discrimination in breach of the Undertakings.
