Telecom and the watchdog

History suggests nobody should hold their breath for a resounding result from Telecom's latest brush with the Commerce Commission.

Telecom has had repeated brushes with the Commerce Commission since deregulation in 1987, but few have resulted in court action, and none has required Telecom to change its ways.


The Labour government completely deregulated the telecommunications industry. Communications minister Richard Prebble said the government expected Telecom to play the game in the absence of an industry-specific regulator, but added that if it abused its position and there wasn't enough power in the Commerce Commission, the government would take steps to set up a regulator.


The Commission received a complaint from Information Technology Association of New Zealand (Itanz) regarding Sanda Communications, the telecommunications bypass carrier which became Telecom's first competitor by buying 2Mbit/s bandwidth, known as Megaplan, from Telecom and reselling it. Sanda collapsed months later after Telecom doubled its Megaplan tariff. The Commission lsubsequently took court action against Telecom, which dragged on until 1994, by which time Sanda had been renamed and sold twice.


In June, the Commission released a report from its inquiry into telecommunications competition, which identified eight obstacles to competition, reflecting Telecom's inability to be both a supplier and controller of the means of competition. The report singled out lack of competition in network and value-added services as being of particular concern.


A year after its release, the High Court found in favour of Telecom's claim that the Commission acted outside its powers in conducting its review of the telecommunications market. The court decided the commission would not conduct a formal inquiry contemplating a public report unrelated to a particular complaint, transaction or event and disallowed the inquiry.

Opposition Communications spokesman Steve Maharey accused Communications Minister Maurice Williamson of reneging on promises to ensure effective competition in the telecommunications market. He said that "due to inaction by the minister the courts have become the de facto policy makers for telecommunications but their decisions seldom lead anywhere" and called for a review of the Commerce Act and Commerce Commission to ensure the commission has the tools it needs to act swiftly and decisively.

In August, the Commerce Commission cleared Telecom shareholder Fay Richwhite's taking 40% ownership of New Zealand Rail - on whose land Clear's nationwide fibre network runs. NZ Rail also owned 3.2% of Clear, but the Commission issued its clearance report after an undertaking from Fay, Richwhite that its representatives would not take a seat on Clear's board. It said Telecom's dominance of the telecommunications market would not be strengthened by Fay, Richwhite's stake in NZ Rail.

In the same month, BellSouth managing director Keith Davis said the the Commission lacked teeth and called on the government to "pull up its sleeves" on the issue.


Grant Forsyth, executive director of the Telecommunications Users Association of New Zealand (Tuanz) said the Commission was an inadequate watchdog compared to the industry-specific regulators in other countries. Tuanz still joined the Commission's Telephone Number Advisory Group (TNAG).


Telecom copped its first Internet-related complaint to the Commission in 1996, even before the May 15 launch of Xtra. Voyager complained to the Commission and threatened legal action, alleging that Telecom would have an unfair market advantage as both a bandwidth wholesaler (through its then subsidiary Netway Communications) and retail ISP. Xtra boss Chris Tyler shrugged off such fears in a press conference for the launch, saying the issue of how much Xtra paid to connect to the national phone network has been "looked at closely and I believe we're in compliance with legislative requirements".

Only three months later, independent ISPs using Telecom 0800 services to offer long-distance dial-up access were enraged when Xtra announced an 0800 dial-up rate of $4.95 an hour - $1 less than the rate Telecom charged for 0800 access. Either Xtra was getting 0800 at a preferential rate, or it was engaging in predatory pricing, they said.

In September, the Commission announced it would "take a look at" complaints about Xtra's pricing. Geoff Thorne, chief investigator for the commission's Commerce Act division, said he and his staff would be "going to speak to people in the industry and finding out if there are any issues we need to investigate further" after complaints from five ISPs.

Just before Christmas, the Commission announced it would take no further action over claims that Telecom was charging Xtra less for 0800 access than other ISPs, or that it was witholding the planned IPNet access network to hurt independent ISPs. Voyager managing director John O'Hara gamely insisted that he was "basically very pleased" with the Commission's promise to further investigate the complaint that Xtra was selling 0800 Internet access at a loss - that is, at a dollar less than the $5.95 an hour it was apparently paying for it.

O'Hara said that he would consider action to recover financial damages from Xtra and said that Telecom would "have to change its attitude towards customers and competitors, and … stop approaching them the way a rottweiler approaches a pork chop".


In March, Voyager took Telecom to court (on the same day as separate actions by Clear and BellSouth) claiming that Telecom "has admitted to the Commission that Xtra is charging its customers, in the market for providing access to the Internet, a price that is below its cost of providing services to those customers."

In June, a Commission spokesperson said Telecom's refusal to guarantee the quality of its residential lines for data transmission - after having advertised its second line deal for Internet users the previous year - "raised issues under the Fair Trading Act". Telecom subsequently reversed its stance.


A quiet year - although the number portability deed signed late in 1998 was to keep the Commission busy in 1999.


In January, the five companies which which had signed the telephone numbering agreement - Telstra, Vodafone, Newcall Communications and Teamtalk - applied to have the agreement authorised by the Commission to protect themselves from potential legal action over anti-competitive practice.

In April, the Commission received a complaint from Hamilton ISP Lloyd Group, claiming Telecom had acted anti-competitively in preventing it from offering DSL services over Telecom lines on what telecom said were technical grounds. The following month, the Commission said it was awaiting further information from the complainant, which was the last that was heard of the claim.

In May the Commission announced its decision to authorise the Telephone Number Administration Deed signed by Telecom, Telstra, Vodafone, Teamtalk and Newcall.

In September, Communications Minister Maurice Willaimson and Treasurer Bill Birch issued a statement saying they had found nothing wrong with Telecom's 0867 scheme but would act if Telecom stepped out of line. Meanwhile the Commission, which had already launched an investigation into the numbering scheme, said it was still waiting for a complainant to provide it with information. Spokesman Vince Cholewa said it would be "some weeks yet" before its investigation was concluded.


In July the Commission announces it will take no further action on the Lloyd Group's complaint.

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Show Comments