Cut-throat competition pushes Fair Trading Act to the limit for telcos

One of Telecom's Xtra broadband advertisements from 2006.

Commerce Commission fair trading manager Graham Gill says there are a number of reasons why breaches of the Fair Trading Act often take place in the telecommunications industry.

"Firstly, it is a reasonably competitive industry," says Gill. "Each competitor is trying to get an advantage over the other."

The industry also uses many emerging technologies.

"We often find with emerging technologies that we get breaches [of the act]," he says.

Gill said that the industry also attracts "savvy consumers" who expect the technology to work properly.

"And when it doesn't they come to us."

Telecom's latest admission that it spent seven years overcharging its broadband customers is the most recent in a list of Fair Trading Act breaches.

* In December last year the company pleaded guilty to 17 charges of breaching the act over claims made in 2006 while promoting Xtra's Go Large broadband plan.

As part of the promotion, Telecom promised "unlimited data usage on all the internet you can handle", as well as "maximum speed internet".

An investigation found, however, that Telecom was constraining internet speeds, and the company was fined $500,000 in Auckland District Court for breaching the act.

* In 2006 a fault in Telecom's system caused some customers changing call plans to be charged under both their new plan, and their old one, on the day they swapped over. An out-of-court settlement was reached between the Commerce Commission and Telecom that saw the company return around $3.3 million to the customers who had been charged twice.

* In October 2005, the commission reached a settlement with Telecom Mobile after a billing fault in 2001 and caused thousands of customers to be charged peak rates for off-peak calls. Telecom agreed to refund $54,000 to around 11,000 of its affected customers.

* Also in October 2005,Telecom was convicted and fined $4000 under the act for failing to disclose costs associated with a telephone information service.

* In 2003, Telecom Mobile Limited was fined $10,000 plus costs in the Wellington District court after pleading guilty to two charges of breaching the Fair Trading Act. The charges were connected to a nationwide advertising campaign in late 2001 aimed at attracting existing 025 users, as well as mobile users on rival networks, to switch to its new 027 network.

And Telecom is not the only telecommunications provider to attract the attention of the Commerce Commission.

* In October 2009 the Commission laid charges against Vodafone for alleged breaches of the Fair Trading Act.

The charges relate to the extent of coverage for Vodafone's wireless broadband network advertised in the company's "broadband everywhere" campaign that ran between October 2006 and April 2008.

Other charges laid by the commission related to the availability of free airtime and the cost of using the Vodafone Live mobile internet service.

Gill said he could not comment on that case, since it was before the court.