Commission to investigate Telecom’s Jetstream pricing and service bundling

Is Telecom taking advantage of its market power and substantially lessening competition with its DSL marketing?

In a surprise move the Commerce Commission yesterday announced that it will investigate Telecom’s Jetstream pricing and its bundling of service with the DSL connections.

Commission spokeswoman Jackie Maitland says the Commission received information about the way Jetstream was sold through its Contact Centre and collected further information itself. Based on the information gathered, the Commission decided that there are issues under sections 27 and 36 of the Commerce Act which should be investigated.

The two sections deal with “substantially lessening competition” and “taking advantage of market power” respectively. Specifically, Maitland says the Commission will look at how Telecom has bundled toll calls with Jetstream. If customers do not put their toll calls through Telecom, they are penalised with $10 higher monthly Jetstream fees.

Also under scrutiny is the reduction of Xtra’s Jetstream ISP charges. Jetstream DSL bills have two components, one payable to Telecom and the other to the ISP. Xtra, which is wholly owned by Telecom, reduced its Jetstream ISP charge to $10 a month from $20. Other ISPs were forced to follow Xtra’s reduction to remain competitive, even though it halved their profit margin on Jetstream.

Finally, the Commission will look at the price of Jetstream for ISP resale as well as the price of the Unbundled Bitstream Service wholesale DSL offering to see if it’s fair.

Telecom public affairs and government relations manager John Goulter says he is aware that the Commission asked the telco questions about the Jetstream pricing in April, but didn’t hear anything further until now.

Goulter says Telecom received a letter from the Commission yesterday announcing the investigation, but has no further detail than that. He says Telecom is confident that the Jetstream plans are lawful and represent value for customers.

ISPs have always had the ability to purchase Telecom’s DSL plans on a wholesale basis, Goulter says, adding that the telco now gives 30 days' notice before any new products are introduced. “We are totally focused on growing the broadband market,” Goulter says.

Maitland says the investigation will be conducted by the Commission’s enforcement team as it is a Commerce Act matter, and not a Telecommunications Act case. Under the Commerce Act, the Commission can issue cease and desist orders and take the investigated party to court. The court can apply penalties up to $10 million if a person or company has breached the Commerce Act, or 10% of a company’s turnover.

The Commerce Commission has investigated and taken Telecom to court before under the Commerce Act, for introducing the 0867 dial-up prefix in 1999 and for selling data tails at wholesale prices that were higher than retail. Both of these cases are currently in front of the courts, Maitland says.

TelstraClear spokesman Mathew Bolland says the competitor telco welcomes the decision to investigate Telecom but expressed concern about the length of time it may take. “Five years is a long time to wait,” Bolland says, referring to the 0867 and data tails investigations.

Asked what the timeframe would be for the current investigation, Maitland says “The Commission appreciates that time is an important factor in any investigation, and will be progressing its investigation as quickly as possible.”

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