The Commerce Commission announced today it has launched an investigation into an alleged breach of Separation Undertakings by Telecom Corporation of New Zealand. The investigation will assess whether Telecom Wholesale is likely to have discriminated against telecommunications providers in favour of Telecom Retail.
The Commission’s concerns arise from the price at which Telecom Wholesale offered the unbundled bitstream access (UBA) service to telecommunications providers who intended to take up the sub-loop extension service (SLES) from Chorus, compared with the price Telecom Wholesale charged to Telecom Retail.
The sub-loop extension service (SLES) is a commercial service provided by Chorus to enable service provider to supply an exchange-based voice service in conjunction with a cabinet-based UBA broadband service.
“Earlier this year concerns were raised with the Commission about the price Telecom requested for the UBA service to be supplied in conjunction with SLES,” said Dr Ross Patterson, Telecommunications Commissioner. “At the time the Commission advised Telecom of its concerns that Telecom Wholesale’s offer was discriminatory. Telecom responded that it did not believe that Telecom Wholesale was in any way in breach of its non-discrimination obligations.”
The investigation follows the completion on 14 October 2010 of a clarification process into the provision of UBA in conjunction with SLES.
The Commission will now gather information to assist its investigation. Interested parties will be able to make submissions during the investigation. The Commission expects to complete the investigation by the end of March 2011 and will not be making any further comment at this stage of the investigation.
The clarification relating to the provision of unbundled bitstream access (UBA) service in conjunction with sub-loop extension service is available on the Commission’s website www.comcom.govt.nz/uba-with-sub-loop-extension-service/
Unbundled bitstream access (UBA) service refers to the service that enables access to, and interconnection with, that part of Telecom’s fixed public data network that connects to the end-user’s building to Telecom’s first data switch (or equivalent facility) other than a digital subscriber line access multiplexer.(DSLAM). The UBA service allows telecommunications companies to supply broadband services to retail customers without the need to replicate Telecom’s copper local loop.
Under the UBA service Telecom Wholesale may charge an ‘uplift’ where a telecommunications provider is not separately paying the cost the local loop such as purchasing plain old telephone service (POTS). The clarification decision clarifies that the uplift may not be charged wheretelecommunications provider separately purchases the sub-loop extension service (and the local sub-loop) from Chorus.
The price and non-price terms on which Telecom must make the unbundled bitstream access (UBA) service available to other telecommunications providers were set in a standard terms determination made in December 2007.
The Commission’s UBA Standard Terms Determination, including executive summary, can be found at www.comcom.govt.nz/unbundled-bitstream-standard-access-service/
Telecom (Wholesale) is the Telecom business unit that supplies the UBA service.
In December 2006 the Telecommunications Act 2001 was amended. A key component of the amendments to the Act was Part 2A, which set out the requirement for the operational separation of Telecom Corporation of New Zealand Limited (Telecom).
The Act states that the purpose of operational separation is to:
- promote competition in telecommunications markets for the long-term benefit of end-users of telecommunications services in New Zealand;
- require transparency, non-discrimination, and equivalence of supply in relation to certain telecommunications services; and
- facilitate efficient investment in telecommunications infrastructure and services.
Part 2A was implemented by the Telecom Separation Undertakings, provided by Telecom to the Minister of Communications on 25 March 2008 in accordance with section 69K(2)(c) of the Telecommunications Act 2001.
Non-discrimination obligations were imposed on Chorus through clause 31 of the Undertakings and on Telecom Wholesale through clause 56.
The Commerce Commission is responsible for enforcing the Undertakings. The Commission is investigating whether to take enforcement action under Part 2A of the Telecommunications Act.
Penalties. While the Commerce Commission can take enforcement action, it is up to the courts to impose penalties. It is important to note that the penalties set out below are the maximum. It would be up to the courts to set appropriate penalties.
If the Commission finds that Telecom has failed to comply with the Separation Undertakings, the Commission may request that the High Court impose penalties of up to $10 million for the breach, plus $500,000 per day for breaches continuing after the decision by the High Court. In addition, the High Court may order Telecom to pay damages to injured parties and may issue orders requiring Telecom to undertake other remedies, including injunctions restraining Telecom from behaviour that breaches the undertakings.