The Commerce Commission is investigating Telecom over its prices for bundles of services and the amounts it charges rivals to resell high-speed internet services.
The commission "has decided that there are issues under the Commerce Act with Telecom's pricing which warrant formal investigation", said spokeswoman Jackie Maitland.
Telecom chief executive
Theresa Gattung has said she wants to connect 250,000 high-speed internet users by the end of 2005, a third of whom will be serviced by rivals using Telecom's phone lines.
Competitors such as TelstraClear have complained that the price Telecom charges them for its high-speed internet service means they cannot compete with its bundled offer.
"There have been significant complaints that wholesaling arrangements for high-speed internet are not the same as for retail customers," said Andrew Bascand, of Alliance Capital Management in Wellington.
"The Commerce Commission is aware the deal is that they offer the same plans to everyone. It doesn't want Telecom to have all of the 250,000 customers."
Telecom had 74,449 high-speed internet residential connections at September 30, of which just 42 were connected via its rivals, a quarterly report by the nation's telecommunications regulator said last month.
The regulator said Telecom had achieved 30 per cent of its 2005 connection target, but only 0.05 per cent of its wholesale target.
TelstraClear spokesman Mathew Bolland welcomed the investigation.
Telecom spokesman John Goulter was surprised by the commission's statement and the way the statement had been released to the media. He said the public statement contained more information than Telecom had received from the commission. Telecom had been working with the commission since April on the issues.
Maitland said that also under investigation were a cut in charges at Telecom's Xtra internet service provider and the price the company charged rivals for its high-speed internet service.
The regulator was investigating whether Telecom lessened competition and took advantage of its market power, which were forbidden under the Commerce Act.
