Telecom to pay rivals $1.6m compo in out-of-court settlement

Telecom must pay its rivals $1.6 million after a settlement out of court with the Commerce Commission.

Telecom's compensation bill since December now tops $25 million - $15 million to recompense customers for XT outages and $10 million in Fair Trading Act breaches.

The commission has directed the telco to pay Vodafone and Orcon compensation for the competitive damage caused by three separate discount deals aimed at retaining wholesale customers on its network.

The commission began legal proceedings in the High Court last November over Telecom loyalty offers, which if successful could have seen the company pay $10 million for each breach.

Vodafone and Orcon, which were also offering wholesale services off their own Auckland networks, claimed they would be ineligible for the deals unless they signed over at least 90 per cent of their wholesale business to Telecom, thereby undermining their own infrastructure investment.

Under Telecom's operational separation undertakings, its wholesale arm must sell broadband and phone services to other telcos under the same terms and conditions as those given to its own retail business.

Yesterday Telecom said the agreement with the commission would see it boost training of its wholesale staff on "non-discrimination" issues, in addition to paying the compensation.

"We thought the loyalty offers were a legitimate response to competition, but non-discrimination is an undefined and untested concept, so the business had to do its best to navigate through considerable uncertainty," said counsel Tristan Gilbertson.

"We thought we landed on the right side of the line - but the commission disagreed."