Telecom breached operational separation undertakings

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Telecom’s Independent Oversight Group has found the company has breached its operational separation undertakings by offering wholesale discount deals to its customers.

The telco watchdog has called the breaches "non-trivial". Telecom Wholesale spokesperson Nicole Walker said the company was "digesting" the news and wouldn't comment further until it had received a full report on the breaches from the oversight group, expected this afternoon.

The oversight group began looking in to the matter after Vodafone and Kordia complained that the offers were anti-competitive and dissuaded rivals from unbundling in Telecom's phone exchanges. Vodafone and Kordia alleged that Telecom Wholesale breached undertaking clauses in relation to equivalence of inputs and discrimination by making the offers. The oversight group has upheld these complaints.

Kordia and Vodafone declined to comment at this stage.

The oversight group has forwarded its decision to the Commerce Commission, which is separately considering a formal investigation into whether Telecom Wholesale's loyalty discounts breached the Commerce Act.

A commission spokesperson said it had received the oversight group's decision and is currently considering it before deciding what further action is appropriate.

"It is important to note that only the courts can decide on the appropriate penalties for any breach of the Telecommunications and Commerce Act," she said.

The maximum penalty for breaching an undertaking is a $10 million fine, plus $500,000 a day for a continuing breach.

Telecom began offering discounts to wholesale customers in Auckland in December, on the condition that they had 90 per cent of their business with the company and extended the offer earlier this year targeted at wholesale customers that maintained 90 per cent of business in five North Island centres with Telecom Wholesale.