Commerce Commission taking Telecom to court

2.05pm

Competition watchdog the Commerce Commission today filed High Court proceedings against Telecom, alleging the company had misused its market power to deter competition in high speed data transmission.

The alleged behaviour includes Telecom setting retail prices lower than wholesale prices for a particular product.

If the court finds that Telecom has breached the Commerce Act, it could order Telecom to pay a penalty of up to $10 million or, either three times the value of any commercial gain resulting from the breach or, if this amount is not known, then 10 per cent of the turnover of the business.

Commission chair Paula Rebstock said the industry has known about the investigation for some time.

The commission alleges Telecom priced access to its data retail services for high speed data transmission, in a way that deterred potential and existing competitors.

Ms Rebstock alleged this behaviour continued in the market outside major cities.

She said the commission investigated Telecom in its enforcement capacity under the Commerce Act and was taking civil action to allow the courts to decide whether Telecom had breached the Act.

Ms Rebstock said that as the matter was before the court, the commission was unable to provide further comment.

She said the decision to prosecute Telecom was unrelated to the commission's recommendations on local loop unbundling (LLU) made to Communication Minister Paul Swain, in December.

The LLU investigation focused on whether Telecom should be forced to give competitors rental access to its local loop -- essentially the copper wires which link consumers with its exchanges.

Under LLU, Telecom's competitors could attach their own electronics to the wires in order to provide residential and small to medium business consumers with broadband internet in competition with Telecom.

In its final report to the minister on the matter the commission said it did not "recommend the specification or designation of unbundling of local loops".

Instead the commission recommended a scenario in which Telecom would wholesale high speed data services to its competitors.

The commission said it was unable to discuss its LLU Report, which is currently being considered by the Minister of Communications.

Telecom shares fell 3 cents to $5.76 shortly after the announcement from $5.82 earlier in the session. They have traded between $4.25 and $5.92 over the past 12 months.

- NZPA