Telecom coughs up $31.6mln to rivals to settle broadband row

Friday 14th October 2011

Telecom is to pay five rival telcos $31.6 million to settle a Commerce Commission investigation into alleged overcharging for broadband services rather than face the courts.

While New Zealand’s largest telecommunications company does not admit liability, the commission said in a statement the compensation paid to Vodafone, Orcon, CallPlus, Compass and Airnet “returned its commercial gain” from failing to provide the same priced access to a new broadband service as it gave itself.

The investigation stemmed from complaints in April last year, eight months after Telecom launched a new “sub-loop extension service” (SLES) which allowed rivals to offer voice services from their own equipment, housed in Telecom exchanges, and offer fast broadband from Telecom’s network of newly installed roadside cabinets – part of its own roll-out of fibre-optic cable.

Telecom is obliged under formal Operational Separation Undertakings to offer competitors access to services on an equal footing in order to ensure retail competition. The undertakings will be removed if, as expected, shareholders approve splitting Telecom and its infrastructure arm, Chorus, into separate companies at a vote next month.

The settlement avoids the dispute over SLES charging becoming a hangover issue after the split.

Telecom’s competitors had charged the telco was “in effect seeking to recover the costs of its copper access twice,” the commission said in its October 2010 letter to Telecom about the investigation into discriminatory pricing.

In a statement today, Telecom said it had “failed to meet expectations” of a timely provision of the new service “in a timely manner” and was now “rolling out an Unbundled Bitstream Access service with access seeker voice.”

CallPlus and Kordia had sought compensation of $65 million and $74 million respectively.

BusinessDesk.co.nz

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