The Independent Oversight Group (IOG), which monitors Telecom's compliance with its operational separation undertakings, has released the reasoning (pdf) behind yesterday's ruling against Telecom Wholesale's loyalty discount offer.
The key to the decision was whether the group accepted a broad definition of the term "will not discriminate" in clause 51 if the undertakings, as argued by complainants Vodafone and Kordia or whether to take a narrow definition, as argued by Telecom.
The narrow view holds that for there to be discrimination, there has to be unjust or prejudicial treatment. Telecom argued its discount offer was open to all comers. Therefore it was not prejudicial or discriminatory.
Telecom argued the business decisions other service providers may have made to invest in unbundling were irrelevant to the test of non-discrimination.
The complainants argued for a broader definition, under which discrimination happens when an offer is made that would cause a service provider severe disadvantage if the offer was accepted.
They argued for the common definition of discrimination to apply — simply that the treatment is different, rather than prejudicial.
The IOG, which took external legal advice in making its decision, notes that the purpose of legislation can determine which definition applies to wording in that legislation. It notes that in different types of legislation, the word prejudicial is interpreted differently.
Section 69A of the Telecommunications Act is then invoked by the IOG to determine the purpose of the legislation under which the undertakings were made. This talks of non-discrimination, transparency, equivalence and, in a key provision, enabling efficient investement in telecommunicaitons infrastructure.
The IOG also appears to have found a smoking gun in an executive paper that was the origin of the offer. The paper contains phrases that, the IOG says, indicate the offer was constructed in a manner to make it unacceptable for providers investing in unbundling.
The paper also expressed concern about growing competition in the wholesale market, the IOG says.
Telecom Wholesale CEO Matt Crockett last night issued a statement saying he was disappointed with the decision, but would move as quickly as possible to remove the offers from the market.
He said no further comment would be made until the decision was reviewed.