Dial-up case vindicating Telecom to have huge impact – ICT lawyer

In the decision, the Court said that the Commerce Commission failed to show Telecom abused its market dominance under Section 36 of the Commerce Act. This is because the Commission could not prove that Telecom would not have introduced the 0867 package if it didn’t have Significant Market Power (SMP).

Wigley is calling for a review of Section 36 in light of the decision.

“If there is to be change, amending legislation is required. The Courts can’t do it, as they are interpreting legislation. Until this happens, companies with SMP have a large measure of freedom to act in ways which many would regard as unsatisfactory and anti-competitive,” he says.

“European law doesn’t tolerate that approach. Under the legislation there, Telecom’s activity was likely to be in breach. On a telecommunications appeal last year to the highest European Union Court, the judges confirmed that a company with SMP has ‘a special responsibility not to allow its behaviour to impair genuine undistorted competition’. That’s because competition is already weakened by the company with SMP.

“What’s important is the precedent it (the Supreme Court’s judgement) sets for the future. Those with substantial market power (SMP) will be able to continue to exert their power much more freely. The case largely re-affirms that right. Often the Telco Act will not constrain this use of power. For example, price squeeze, issues around bundles, so-called “pocket pricing”, on- and off-net mobile pricing differentials, etc, don’t fit easily under the Telco Act. That’s where the Commerce Act should shine,” he says.

Wigley says that a robust Commerce Act is necessary, especially given that the government has ruled that the Ultra Fast Broadband network will have a 10-year regulatory reprieve – in other words the Telecommunications Act will not apply to the fledgling fibre network.

"That regulatory holiday takes away the Telecommunications Act for this critical market development. Granted, some contraints on vendor action will be contractually agreed but market problems seem inevitable with such a major monolopy player," he says.

Wigley’s reaction is at odds with telco analyst Paul Budde who called the Supreme Court's judgement an “historical curiosity”. TUANZ CEO Ernie Newman wrote in his blog post expressing “gratitude that such a debacle could never happen again”, and that we are “so fortunate that we now have a pro-active, precise regulatory regime, enshrined in the Telecommunications Act, administered capably and predictably by the Commerce Commission.”