Telecom 'favouritism' goes under microscope

The Commerce Commission is to delve into claims Telecom has played favourites to the detriment of other telecommunication companies.

The commission yesterday announced it was to investigate an alleged breach of Telecom's separation undertakings, which ensure the company is even handed in the provision of access to its network.

It was concerned Telecom was charging other telecommunications companies, including Vodafone, Orcon and Callplus, more to rent the copper lines running from the telephone exchange to homes than its own retail arm.

Telecommunications commissioner Ross Patterson said concerns were raised earlier this year about the price Telecom was charging the other telcos.

"At the time the commission advised Telecom of its concerns that Telecom Wholesale's offer was discriminatory.

Telecom responded that it did not believe Telecom Wholesale was in any way in breach of its non-discrimination obligations."

In a statement Telecom yesterday said it did not believe it had breached the undertakings, or that there has been discrimination in this instance.

"Of course we will participate fully in the investigation, and have some concerns which we'll be pursuing separately with the commission, but will not comment further while we work through this process with the Commerce Commission," Telecom said.

In a June submission to the commission over the issue, Vodafone said the benefits to having the issue resolved were largely commercial, through not having to pay twice to access the copper network.

Orcon chief executive Scott Bartlett said the cost to the companies could be tens of millions of dollars.

He said the dispute had altered the investment behaviour of telcos because it had made local loop unbundling - installing broadband technology into exchanges and renting the last stretch of copper line from Telecom - largely uneconomic.

"If we weren't being discriminated against for the past two and a half years then local loop unbundling would probably cover the whole country by now," said Bartlett.

On Thursday the commission released a clarification of the terms and conditions that Telecom can offer the specific service at the centre of the dispute.

Telecom has said it would take up to 18 months and cost between $5 million and $10 million to make the systems changes necessary to remedy the situation - a claim the commission found "surprising" given there had been ongoing industry discussion about the issue.

The commission would now undertake an investigation into whether a breach occurred, which it expects to complete by March next year.

If the Commerce Commission finds Telecom did favour its own retail arm, the company could be liable for High Court imposed fines of up to $10 million, then $500,000 per day for failing to remedy the breach beyond the court decision.

In July, Telecom paid a $1.6 million out-of-court settlement to Vodafone and Orcon over wholesale loyalty offers the commission deemed were anti-competitive.

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