Telecom has admitted it breached the Fair Trading act by misleading more than 130,000 of its broadband customers.
It has just reached a settlement with the Commerce Commission, admitting it overcharged customers who wanted to switch to its broadband internet service.
Commerce Commission Fair Trading Manager Graham Gill said while Telecom had co-operated in the investigation, the commission was "becoming increasingly concerned at the number of occasions on which Telecom has acted in breach of the Fair Trading Act".
He said since 2003 Telecom had been the subject of Fair Trading Act convictions, settlements or warnings on at least eight occasions.
After introducing its new broadband service in 1999, Telecom offered existing dial-up customers the opportunity to switch to broadband.
Those making the switch would continue to have a dial-up connection, but were assured by Telecom they would not be charged for it.
But from 1999 to 2006, because of a number of administrative errors, Telecom customers who signed up for broadband continued to be charged for their former dial-up connection.
The error resulted in customers being overcharged in excess of $9.5 million.
Graham Gill said Telecom's error was "substantial".
"Customers trust that businesses will have the correct processes in place and that they will be charged the right price," Gill said.
He said Telecom was working to refund all the customers who had been overcharged.
While the Commission said no customers were left out of pocket by the error, as customers had been voluntarily refunded since 2007, there were still around 1400 affected customers who had "yet to be "traced".
Alan Gourdie, chief executive of Telecom Retail said after becoming aware of the issue in 2006, the company "investigated the cause of the problem, and did the right thing for our customers."
"A process was started to identify and credit all affected current or historic customers for any incorrect charging they incurred. This refund process was completed in early 2009," said Gourdie.
* See the Commerce Commission release here.