Telecom fined a cool half million

Advertising misrepresentations lead to $500,000 fine

Telecom has pleaded guilty to 17 charges of breaching the Fair Trading Act in 2006 when promoting ISP Xtra’s Go Large broadband plan and was fined $500,000 in the Auckland District Court today.

According to a Commerce Commission release, between August to November 2006 Telecom and Xtra undertook a nationwide advertising campaign to promote the 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”.

The commission launched an investigation following complaints from Xtra customers who found that the speed of the plan was constrained — in some cases to dial-up speed.

The commission says details 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 including a "traffic management policy" for use during peak times and for those using peer-to-peer applications.

However, the commission established that a change made in early December 2006 meant the traffic management policy applied at all times and across all applications, meaning in some cases customers were not experiencing unconstrained speeds.

“There is increasing choice in the broadband market and it is important that all relevant information is disclosed to consumers so that they can make informed decisions,” said Graham Gill, Commerce Commission fair trading manager, in a statement today.

He says to avoid the risk of breaching the Fair Trading Act, business should ensure that their goods and services can live up to any marketing hype.

Telecom co-operated with the Commission’s investigation and voluntarily paid around $8.4 million in compensation to approximately 97,000 affected customers, he says.

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