Monopoly makes mockery of law

By Brian Fallow

Between the lines

For the Telecommunications Users Association (Tuanz), the High Court's decision against Telstra over the re-billing issue shows yet again that competition cannot flourish in the present legislative environment.

Their frustration is understandable.

As Tuanz sees it, Telecom has been getting away with murder (or at least grievous bodily harm) towards its competitors and customers. It cites:

* Telecom's response to residential competition from Saturn by cutting prices only where Saturn operates.

* Telecom's unilateral imposition of new access arrangements on other internet service providers.

* Telecom's plug-pulling on re-billing now that Telstra has built up a substantial one-stop-shop telecommunications management business.

The Government is considering proposals to overhaul the Commerce Act, including section 36 which is one of the provisions invoked by Telstra in its case against Telecom.

It is not clear, however, that the proposed amendments would have helped Telstra in this case.

Section 36 prohibits dominant firms from using their position for the purpose of restricting, preventing, deterring or eliminating competition.

Proposed changes would widen its scope from dominant firms to firms with substantial market power and make it clear that their purpose can be inferred from their overall conduct.

But the problem in this case is that Justice Williams did not accept that Telecom was using its position for any of the prohibited purposes. He does not accept that by refusing rebilling Telecom would be eviscerating Telstra's business and stifling competition.

Telstra boss Peter Williamson's vow to carry on, "working around" the removal of re-billing perhaps gives the judge's conclusion some support.

Justice Williams describes Telecom's conduct as looking very much like the ebb and flow of commerce in a competitive environment. But is a judge the best judge of commercial reality in an industry like this?

Justice Williams regards the dispute as "in essence a comparatively straightforward contract case". Telecom's standard contract with its customers allows them to assign performance of their side of the agreement to someone else (like Telstra) but only if Telecom agrees.

For a time Telecom went along with customers' requests to deal with them through Telstra. But it was within its contractual rights to refuse to do so any more, the judge said.

There is an air of unreality about this line of reasoning, however, arising from the fact that Telecom's local network remains an almost complete monopoly.

A firm which baulked at Telecom's standard contract could take its business to another ubiquitous network except that oh dear there isn't one. No wonder Telecom is a staunch defender of the status quo.