Early Telecom ruling expected

High Court reserves decision on Telstra's application for injunction.

By Richard Braddell

WELLINGTON - An early ruling is expected after the High Court reserved its decision on Telstra's application for an interim injunction restraining Telecom from cancelling customer re-billing arrangements.

Telstra has argued that re-billing, under which its customers who have business with Telecom request that Telecom accounts be forwarded to Telstra for payment, is vital to its business, which has been built around providing total management services to business customers.

Telstra argues that traffic and service information in the bills is vital to its integrated management of telecommunications services which, in the case of one customer, consolidated more than 40 invoices a month from Telecom.

Although Telstra still has only limited investment in its own facilities, its business has grown rapidly and it now has more than 1000 business customers producing $2 million in revenue monthly.

In 1997, sales jumped 400 per cent and in the June 1998 year, Telstra generated revenue of $39 million, resulting in a maiden profit of $338,000.

But while Telstra argued that Telecom knew it had acted in reliance on standardised re-billing letters of authority drafted by officials of the two companies, Telecom said there was no contractual arrangement.

Telecom submitted that the impact of the injunction would be substantial since the letter of authority would change from a mere authorisation into a set of one-sided mandatory obligations on Telecom.

"The effect on Telecom would be to require Telecom - on demand - to disclose to its competitor, Telstra, some of its most valuable intellectual capital. Telecom will be forced to do this irrespective of its commercial interests and without payment or any other consideration," Telecom argued in the High Court yesterday.

In support of its argument, Telecom said the letters of authority had been devised in an ad hoc fashion by middle managers and that it now believed it could do better for itself and its customers by discontinuing the practice.

"For a period of time, without design or analysis, Telecom permitted practices to develop which enabled its competitors to impede it in providing services directly to its own customers, and at the same time permit commercially sensitive information about its services and its customers to pass to its competitors."

While Telstra had argued that Telecom's action breached dominance provisions in the Commerce Act, Telecom said the Commerce Act did not seek to protect or shelter new entrants or small firms from the full effect of competition from larger established firms.

Instead, it endeavoured to protect the competitive process on the assumption that the public welfare was best promoted by an efficient outcome.

Outside the court, Telecom's manger of external relations, Clive Litt, said it was striking that in October 1997, a month before standardised letters of authority were agreed, Telstra signed an interconnection agreement described as an "entire agreement" in which there was no mention of letters of authority.