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ComCom appeal against Telecom unsatisfactory

Wednesday 1st September 2010

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The Commerce Commission’s failed bid to rap Telecom over its 0867 dial-up internet fees in 1999 has been called “unsatisfactory” and “speculative” by the Supreme Court.

The judgement, given by Justices Peter Blanchard and Andrew Tipping, turned down the regulator’s appeal, saying its argument wasn’t put forward in the initial High Court case, and that it was “quite unsatisfactory for the commission on appeal to attempt to remake its case on what is really a speculative basis”.

It contended Telecom used its position of dominance in the wholesale and retail markets to subsidise the fee and make life more difficult for its rivals when it didn’t have to, though the court didn’t agree.  

“Without supporting financial evidence it would be grossly unfair to Telecom to make assumptions about the significance of revenues from other services or the significance of economies of scale,” the judgement said.

“The commission’s argument, that on any rational consideration the potential loss of customers would necessarily and inevitably have outweighed the other matters at issue, relies on speculation rather than evidence.”

The commission tried to argue Telecom didn’t need to introduce the special fee that would allow it to skirt around paying termination fees to rivals that were using the company’s network to offer free dial-up internet, and put forward a counter-factual case in a hypothetical market without a dominant Telecom figure.

The court rejected this argument as well, saying any company would act to mitigate losses.

The Commerce Commission was ordered to pay $50,000 in costs, plus reasonable disbursements.

The dispute over the 0867 fee came after rival ISPs shared termination costs with fixed-line competitor Clear Communications, and were able to claim fees from Telecom in largely one-way traffic that allowed them to offer essentially free dial-up internet.

Telecom’s shares fell 1.9% to $2.02 in trading today.

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