Xtra not in breach of Commerce Act, says commission

Xtra is not breaching the Commerce Act by offering below-cost access to the Internet, says the Commerce Commission. The decision, released yesterday, represents the conclusion of the Commission's investigation into Telecom's pricing, but chairman Dr Alan Bollard has promised to keep tabs on Telecom's role in the Internet market.

Xtra is not breaching the Commerce Act by offering below-cost access to the Internet, says the Commerce Commission - but chairman Dr Alan Bollard has promised to keep tabs on Telecom's role in the Internet market.

The decision, released yesterday, represents the conclusion of the Commission's investigation into Telecom's pricing.

Given that the original combatants, Xtra's Chris Tyler and Voyager's John O'Hara, are both now gone - and the unanimous conclusion of the ISP panel at this week's IDG Internet Expo that the Internet price war is over - the industry may be in for a quieter, more businesslike spell.

Dr Bollard says the commission considered both local and international information about the growth of the Internet , the development of value-added services and the likely effects of Telecom's strategy on competition.

The commission concluded that Telecom was not in breach of the Act - which forbids a dominant firm from using its dominance for an anti-competitive purpose - because:

• Telecom does not appear to be using a dominant position to harm competitors - other firms which are not dominant but are otherwise in similar circumstances, could profitably adopt a similar strategy.

• The strategy does not depend for its success on driving other firms from the relevant markets, but rather in developing value-added services, such as advertising, entertainment, gaming and electronic commerce.

• In accordance with its strategy, Telecom has every incentive to keep its access prices as low as possible to encourage the market to expand more rapidly.

• Low entry barriers suggest that the competitive process in the relevant markets is less likely to be harmed - significantly, Clear has entered the market since Telecom reduced its Internet access prices and Telstra has announced that it will enter the market.

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