Court finds against Telecom over high-speed data pricing

The High Court at Auckland has found that from 2001 to 2004 Telecom leveraged its position to charge downstream competitors disproportionately high prices for wholesale access to its network.

This prevented competitors from offering retail end-to-end highspeed data services on a competitive basis.

The market for high-speed data transmission services was worth an estimated $120 million per year at the time.

The case was taken by the Commerce Commission.

Telecom said in a statement that it was disappointed with the decision, which it was studying.

The commission's claim related to pricing that was superseded in late 2004 by regulated data transmission service pricing.

"Further regulation and, more recently, operational separation have meant that market conditions at the relevant time also no longer exist and have not existed for more than five years," Telecom group general counsel Tristan Gilbertson said.

The imposition of a penalty against Telecom was reserved by the court for separate consideration. Telecom has 20 working days in which to appeal the decision.

"We have to focus on the future, not on the past, and in that spirit we now carefully consider whether we should continue legal action on the data tails issue," Mr Gilbertson said.

The commission claimed that Telecom contravened section 36 of the Commerce Act, which prohibits firms with a substantial degree of market power from taking advantage of that power for an anti-competitive purpose.

High-speed data transmission services allow businesses to transmit information in digital form between sites across established private networks or to other businesses.

The commission's case focused on Telecom's wholesale pricing of data "tails", which are parts of the connection to a customer that competitors must acquire from Telecom where their networks do not reach the customer.

The commission issued its proceedings in March 2004.

The court found that Telecom's wholesale prices for access often exceeded its retail prices for the service, and that Telecom's pricing was directed to deterring existing or potential competition in the national wholesale market for backbone.

Telecom said today that it was committed as an organisation to constructively engaging with the commission and the industry.

- NZPA