Record Commerce Act penalty against Telecom New Zealand for price squeeze

Forums › ICT Policies and Regulation › Record Commerce Act penalty against Telecom New Zealand for price squeeze

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DonGould

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#460788 20-Apr-2011 08:57

Will reseller action likely follow an appeal to recover damages?

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Cymro

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#460792 20-Apr-2011 09:05

1080p: Well this is a relief to me. I was wondering if Telecom would ever be penalised for it's blatant shoddy behaviour toward the New Zealand market.

I hope the appeal goes the same way as the original judgement. Perhaps this will be a warning and lesson to everybody's favourite incumbent to buck up and provide a good service to everybody.

You see, I knew this would start happening.

A historic case from before regulation caught up to technology and services is going to be used to get a few more digs in at Telecom.

Nobody is going to care about the extensive regulation that is now in place to stunt Telecom's market share, the EOI requirements or non-discriminatory support given to ISP's to level the playing field, or the fact that the majority if not all of the people responsible (at senior management level anyway) for this case have long since left Telecom (some might even be working for the government...).

1080p

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#460794 20-Apr-2011 09:11

Cymro:You see, I knew this would start happening.

A historic case from before regulation caught up to technology and services is going to be used to get a few more digs in at Telecom.

Nobody is going to care about the extensive regulation that is now in place to stunt Telecom's market share, the EOI requirements or non-discriminatory support given to ISP's to level the playing field, or the fact that the majority if not all of the people responsible (at senior management level anyway) for this case have long since left Telecom (some might even be working for the government...).

There is obviously a reason for the discriminatory requirements upon Telecom. Historically they proved that providing a good service to customers was not a priority. This is all ancient history now; they have an excellent network now and look to be providing some great product.

This doesn't change the fact that they did what they did and need penalty.

Cymro

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#460814 20-Apr-2011 09:40

1080p:
Cymro:You see, I knew this would start happening.

A historic case from before regulation caught up to technology and services is going to be used to get a few more digs in at Telecom.

Nobody is going to care about the extensive regulation that is now in place to stunt Telecom's market share, the EOI requirements or non-discriminatory support given to ISP's to level the playing field, or the fact that the majority if not all of the people responsible (at senior management level anyway) for this case have long since left Telecom (some might even be working for the government...).

There is obviously a reason for the discriminatory requirements upon Telecom. Historically they proved that providing a good service to customers was not a priority. This is all ancient history now; they have an excellent network now and look to be providing some great product.

This doesn't change the fact that they did what they did and need penalty.

And the penalty is going to affect who?

Staff? The ones responsible have all been moved on, so any impacts are on effectively innocent people.
Shareholders? Doubtful it will have a real bearing on them, the drop in share price over 6 years caused in part by regulation driven by this is much more of a penalty.
Customers? You might argue that's $12m not being spent on improving services or reducing prices.

That's the problem with this type of judgment, it looks great on paper but doesn't seem to provide "justice".
In my opinion the fine should be an award of damages to the impacted companies, based on actual costs, and the alleged "monopoly" behavior should be punished with a suspended fine set against ongoing behavior.

hellonearthisman

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#460829 20-Apr-2011 09:59

That's $12 million spent on stomping on Telecoms competition.
There Lawyers worked well in dealing this action so long it's now being called historic.

I think there are a few other cases that are working there way through the CC system that relate to Telecoms alleged anti-competitive behavior. A few more years and there might be a ruling on them too.

With Telecom looking at getting ten year regulatory holiday, it could mean it would be 20 years before they start to face there actions of tomorrow.

Bruce Parkes was the Telecom guy who setup the $12 million dollar technical issue that resulted in these anti-competitive charges. Now he's working on rolling out the ultra fast broadband network. Can he be trusted not to make a few other technical issues that will mean Telecom again stomps on the competition.

I just don't trust Telecom any longer.

webwat

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#460884 20-Apr-2011 11:54

This will be a warning to all backhaul providers selling to the new market as well, including Telecom, and its one of the reasons that there should be no regulatory holiday because backhaul is presumably still not covered by CFH contracts.

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PaulBrislen

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#460891 20-Apr-2011 12:06

Businesses must maximise their returns to investors... that's what they do.

But there's a difference between doing the best you can as a business and blocking your competitors from getting ahead. That's a different kettle of fish and in this instance, Telecom was found to have crossed the line.

Telecom will appeal as they say it was accidental, but the Judge clearly didn't feel that way. He says:

"Telecom?s strategy was understood and approved at the highest levels of management."

and proceeds to point out the detail of a memo regarding all of this.

I have absolutely no problem with a company doing its best to get ahead, but that's not what happened here, according to the judge.

These days of course the stupidity of taking a case to court and waiting for a decade doesn't happen. We have the Commerce Commission and the Telco Act which gives the ComCom the power to act before these things become an issue, not after the damage has been done.

Compare this issue with the loyalty offer - both have been deemed to be anti-competitive, both earned Telecom a fine and both have been removed from the market. In court that took a decade, under the Telco Act it took 18 months to two years.

I know which one I prefer.

Paul

hellonearthisman

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#460905 20-Apr-2011 12:56

Computer World has a look at the issues of Bruce Parkes and his current dealings with the rural broadband initiative (RBI) and the Ultrafast Broadband scheme (UFB).

http://computerworld.co.nz/news.nsf/news/former-telecom-exec-involved-in-breach-of-commerce-act-now-...

It''s not a good look.

webwat

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#460953 20-Apr-2011 14:48

hellonearthisman: That's $12 million spent on stomping on Telecoms competition.
There Lawyers worked well in dealing this action so long it's now being called historic.

I think there are a few other cases that are working there way through the CC system that relate to Telecoms alleged anti-competitive behavior. A few more years and there might be a ruling on them too.

With Telecom looking at getting ten year regulatory holiday, it could mean it would be 20 years before they start to face there actions of tomorrow.

Bruce Parkes was the Telecom guy who setup the $12 million dollar technical issue that resulted in these anti-competitive charges. Now he's working on rolling out the ultra fast broadband network. Can he be trusted not to make a few other technical issues that will mean Telecom again stomps on the competition.

I just don't trust Telecom any longer.

I hope the guy has had enough of Telecom and now wants everyone to get a fair go, but how do we know? Experience of this particular bit of history within Telecom is different from the open access that is supposed to be a feature of the CFH deals. Despite CFH being run by an expert in how the backhaul providers work, the rest of us need confidence that CFH is creating the best competitive environment, especially considering the government specifically said backhaul would not be part of CFH contracts.

Any company that owns/ the market will have reduced incentive to provide the most competitive service whether it abuses market power or not. I guess we need way more domestic data centre capacity/demand and another nationwide backhaul player to get a really competitive market. Perhaps government needs to put more demands on actual UFB and RBI results to ensure we get the maximum competition without stranded assets.

Time to find a new industry!

Beccara

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#460966 20-Apr-2011 15:33

Another national player for backhaul? Really? If I wanna haul my data from my Wellington NNI interface to Auckland Sky Tower where my AAA is and International feed terminates then I can call up: Telecom,Telstra,Citylink,FX Networks and Kordia and ask them, I can take my FX Networks quote to my Kordia account manager and ask them to beat it and then I can jump to Telecom and see what pricing they have, If that doesnt work out there is always Telstra and Citylink left.

I've personally got no concerns with this guy running the show, I fail to see how he can influence it badly. CFH mandates that the LFC be open and fair, CFH set the price cap on the services and if the LFC wants to go lower than that price then they can, If they do they must offer the same terms and conditions to every RSP. So please inform me how anyone can rig this apart from putting it in the contract

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webwat

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#460972 20-Apr-2011 15:46

Big cities sure, but some of the UFB areas are pretty small centres. Not sure if FX have a POP in Queenstown but it would be more difficult to drive the price down there. There probably won't be enough traffic to pay for comjpetition in the smaller centres until Pacific Fibre has its international cables landed anyway. But then cloud computing is supposed to take off too, so that might do it...

Time to find a new industry!

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PaulBrislen

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#460975 20-Apr-2011 15:50

There are four legs to your internet connection.

1: International capacity into NZ - currently there's really only the Southern Cross for this.
2: National backbone - Telecom, FX, TelstraClear - there are choices in this market.
3: What I'll call regional backbone - smaller towns, loops around big cities etc. Telecom for the most part, but also Vector in AK, CityLink in WEL etc
4: The last mile connection to your house/building.

The UFB really only covers point 4. The rest are left unchanged by the UFB funding and are open to the existing regulatory cover.

It's worth noting that because the court case took so long there is no recourse for the other telcos to recover monies from Telecom. It would need to have been sorted in three years for that to happen - IANAL but I did talk to one about this.

Paul

webwat

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#461012 20-Apr-2011 17:24

PaulBrislen: There are four legs to your internet connection.

1: International capacity into NZ - currently there's really only the Southern Cross for this.
2: National backbone - Telecom, FX, TelstraClear - there are choices in this market.
3: What I'll call regional backbone - smaller towns, loops around big cities etc. Telecom for the most part, but also Vector in AK, CityLink in WEL etc
4: The last mile connection to your house/building.

The UFB really only covers point 4. The rest are left unchanged by the UFB funding and are open to the existing regulatory cover.

It's worth noting that because the court case took so long there is no recourse for the other telcos to recover monies from Telecom. It would need to have been sorted in three years for that to happen - IANAL but I did talk to one about this.

Paul

Paul, do you know how close the 3 national backbones are to their design capacities? I suspect there could be some pressure to upgrade national backbone networks to support the southern cross upgrade.

Also, I wonder if the government has forgotten to amend the Electricity Act so that Transpower can sell wavelengths on its national fibre network.

Time to find a new industry!

Beccara

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#461018 20-Apr-2011 17:35

PaulBrislen: There are four legs to your internet connection.

1: International capacity into NZ - currently there's really only the Southern Cross for this.
2: National backbone - Telecom, FX, TelstraClear - there are choices in this market.
3: What I'll call regional backbone - smaller towns, loops around big cities etc. Telecom for the most part, but also Vector in AK, CityLink in WEL etc
4: The last mile connection to your house/building.

The UFB really only covers point 4. The rest are left unchanged by the UFB funding and are open to the existing regulatory cover.

It's worth noting that because the court case took so long there is no recourse for the other telcos to recover monies from Telecom. It would need to have been sorted in three years for that to happen - IANAL but I did talk to one about this.

Paul

Exactly Paul, UFB's covering point 4. Given the UFB zones and NNI hand-off covers all connections within that zone point 3 is almost taken care of (I.E your Hamilton NNI will also handle Te Awamutu) Point 2 is the sticky bit at the moment not addressed in either UFB or RBI but I believe their is already a healthy competitive environment there. Point 1's been done to death.

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