Telecom loses case over high-speed data connections

Wednesday 14th October 2009

Telecom has been found guilty of using its dominant position to prevent and deter competition in the business-to-business high-speed data transmission market, the High Court in Auckland ruled today.

New Zealand’s largest telecommunications company may be fined up to $10 million for breaching the Commerce Act following the Commerce Commission’s successful claim that Telecom took advantage of its power to be anti-competitive between 2001 and 2004.

The amount of penalty against Telecom has been reserved by the court, while Telecom has 20 working days to appeal the decision.

“Today’s judgment is a timely reminder that the Commerce Act prohibits those with substantial market power from taking advantage of their position for anti-competitive purposes,” said Commerce Commission chairman Mark Berry.

“This important prohibition can apply even in regulated industries, to the extent that such firms are not constrained by the regulatory regime in question.”

High-speed data transmission services allow large amounts of data to be transmitted across established private networks between different offices or to other businesses.

The Commerce Commission’s case focused on Telecom’s wholesale pricing of data ‘tails’ – the customer connection Telecom’s competitors must acquire from Telecom where their networks do not reach the customer.

The court found that from 2001 to 2004 Telecom charged downstream competitors disproportionately high prices for wholesale access to its network, preventing them from offering competitive retail end-to-end high-speed data services.

Its wholesale access price for competitors often exceeded its own retail prices for the service, and was consistent with Telecom’s strategy to deny competitors access at prices that would permit rivals to utilise and develop their own networks.

As the only nationwide telecommunications owner and operator at the time, Telecom breached section 36 of the Commerce Act which prohibits persons with a substantive degree of market power from taking advantage of that position.

Telecom expressed disappointment at the ruling.

“The case stems from the introduction of retail and wholesale pricing of data services, more than 10 years ago, in a regulatory and competitive environment that was very different from today’s,” said Telecom group general counsel, Tristan Gilbertson.“The Commission’s claim related to pricing that was superseded in late 2004 by regulated data transmission service pricing.

Further regulation, and more recently, operational separation have meant that market conditions relevant at the time also no longer exist and have not existed for more than five years.”Telecom shares rose 0.8% in this morning’s trading to close at $2.59.

Businesswire.co.nz

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