Commerce Commission takes Telecom NZ to court

The Commerce Commission is finally taking Telecom New Zealand Ltd. to court for allegedly “deterr(ing) competition in markets involving high-speed data transmission”.

In a statement released a short time ago, the commission says Telecom has “misused its market power” by setting retail prices “lower than wholesale prices for a particular product”.

“Telecom has priced access to its data tail services for high-speed data transmission, for the purposes of deterring potential and existing competitors from engaging in competitive conduct” says the release which quotes commission chair Paula Rebstock as saying this behavior continues today in markets outside the major CBDs.

Rebstock says taking legal action against the incumbent does not conflict with the commission’s role as telecommunications commissioner or its review of the unbundling of Telecom’s local loop (LLU).

“In making its LLU recommendation, the commission concluded that there was limited competition in the data transmission market. At the same time, it was not possible for the commission to specifically take into account the outcome of the separate data tails investigation under the Commerce Act. That issue of whether Telecom had behaved anti-competitively can only be determined by the courts.” The commission statement says now the matter is before the courts it can not comment further on the matter.

Telecom rejects the commission’s move as “unnecessary” and “a throwback to the old telecommunications regime”.

General counsel Mark Verbiest says the proceedings related to data products that were put in the market in 1998.

“This is an historic issue and frankly we’re surprised it has reared its head now. The fact of the matter is that we have no outstanding disputes in relation to our data pricing with other carriers.”

Telecom will be defending itself in court, says the statement.

The commission statement alleges that Telecom introduced a new “retail high-speed data transmission services” called Streamline in 1998 followed by a new wholesale pricing structure, called “carrier data pricing” (CDP) in 1999. Other carriers could either resell Telecom’s retail product or buy access to dedicated data tails in Telecom’s network to provide their own retail services.

The commission alleges that Telecom priced this second option, buying access to dedicated data tails to sell their own service, too high. Not only does the price exceed the price charged by Telecom for an end-to-end re-sale service, it exceeds the retail price charged by Telecom for comparable data services and the price Telecom charges itself for access to data tails.

If the court finds Telecom has breached the act it could order Telecom to pay a penalty of up to $10 million or either three times the value of any commercial gain resulting from the breach or if commercial gain is not known, then 10 per cent of the turnover of the business.

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