As part of its investigation into alleged breaches of the Separation Undertakings by Telecom's Wholesale business unit, the Commerce Commission is seeking submissions on its preliminary views on the meaning of the 'equivalence of inputs' and 'non-discrimination' obligations contained in the Undertakings.

The Commission's investigation followed receipt in August of the Independent Oversight Group's (IOG) findings that Telecom Wholesale's loyalty offers constituted a breach of Telecom's Undertakings. The Commission also separately received complaints on the same matter.

The investigation relates to three separate loyalty offers made by Telecom Wholesale during the period from December 2008 to July 2009.

"The consultation document outlines the Commission's current views on Telecom's legal obligations under the Undertakings," said Dr Ross Patterson, Telecommunications Commissioner. "However, the Commission will consider submissions before making a final decision."

The consultation document can be found on the Commission's website www.comcom.govt.nz under Operational Separation of Telecom.

Submissions on the draft report are due by Friday 30 October 2009 and should be sent to telco@comcom.govt.nz

A final report on whether or not any enforcement action is required will be issued after consideration of any submissions received.

In the event that the Commission finds that a breach of the Undertakings is likely to have occurred, the Commission may issue proceedings in the High Court to seek remedial orders and/or monetary penalties and damages.

Background

The Separation Undertakings have effect as a deed given by Telecom to the Crown under Part 2A of the Telecommunications Act 2001 (Act) on 25 March 2008. The Separation Undertakings required Telecom to establish an Independent Oversight Group (the IOG) to monitor Telecom's compliance with the Undertakings. The IOG's decisions are not binding on the Commission.

The Commerce Commission is responsible for enforcing the Undertakings. The Commission is investigating whether the Telecom Wholesale 'loyalty offers' are likely to have breached the Undertakings and, if so, what enforcement action (if any) to take under the Act.

Penalties. While the Commerce Commission can take enforcement action for a breach of the Undertakings, it would be up to the courts to set appropriate penalties.

If the Commission finds that Telecom is likely to have breached the Separation Undertakings, the Commission may request that the High Court impose penalties of up to $10 million for each breach. In addition, the High Court may issue orders on any terms and conditions the High Court thinks appropriate, including to restrain Telecom or to require Telecom to undertake specific actions.

The Commission has published guidelines for handling operational separation complaints. These guidelines can be found on the Commission's website www.comcom.govt.nz under Operational Separation of Telecom.