Telecom has been fined $500,000 over misleading claims it made when promoting its Xtra Go Large broadband package - but an industry watchdog says there are positive signs the telco giant is trying to change its behaviour.

Telecom pleaded guilty in the Auckland District Court yesterday to 17 charges of breaching the Fair Trading Act over claims it made in 2006 when promoting the Go Large package.

It is the fourth time that Telecom or one of its companies has been convicted under the Fair Trading Act.

Telecommunications Users Association (Tuanz) chairman Chris O'Connell said the Go Large package promotion "definitely upset a lot of people" and the resultant fine could have been bigger.

"The fine is big enough to be noticed but in terms of behaviour modification it's probably going to be effective and the fact that they pleaded guilty rather than fought it shows they are heading in the right direction," he said.

"I think you have to contrast the change that Telecom has gone from Theresa [Gattung] making speeches about confusion to these days where under Paul Reynolds Telecom does try pretty hard to play the game."

The court heard how the Commerce Commission launched an investigation not long after the Go Large launch when many who had signed up found internet speeds were constrained - in some cases to dial-up speed.

The deal promised "unlimited data usage ... all the internet you can handle and maximum speed internet".

The Commerce Commission found in the fine print of the promotion material and on Telecom's website that it had a disclaimer: "as fast as a user's line will allow". Telecom also outlined the possibility of constraints including a "traffic management policy" for use during peak times and for those using peer-to-peer applications, such as downloading music and movies.

The commission established that a change Telecom made in early December 2006 to how the Go Large plan was administered meant that the traffic management policy applied at all times and across all applications.

Commission spokesman Graham Gill said there was increasing choice in the broadband market.

It was important that all relevant information was disclosed to consumers so that they could make informed decisions, he said.

"To avoid the risk of breaching the Fair Trading Act business should ensure that their goods and services can live up to any marketing hype - in this case Telecom clearly failed to do so," said Mr Gill.

Telecom's director of home services, Ralph Brayham, said: "We failed to adequately disclose various qualifications to our Go Large and Unleashed plans and we apologise for this.

"In the three years following the Go Large closure we have made significant changes across our broadband portfolio and have learnt a number of lessons from the Go Large campaign," he said.

Telecom confessed to its Go Large mistake in February 2007 and stopped offering the plan to new customers.

It paid the 60,000 affected customers $8.4 million in compensation.

Mr Brayham said a further 1700 customers, who were on the Go Large plan between October and December 2006 but had not already received a credit, were owed a total of $44,000 and would be contacted and credited soon.