Wednesday, July 28, 2010

Telstra fined $19m for blocking wholesale rivals

The claim that this was not deliberate is one of the biggest heaps of bovine dung that I have ever encountered

TELSTRA has been slapped with an $18.5 million fine for blocking its rivals from installing broadband equipment at its telephone exchanges.

An 18-month long federal court case came to its conclusion this morning after Justice John Middleton found Telstra contravened the Trade Practices Act and its carrier licence conditions on 27 occasions between July 2006 and April 2008.

The Australian Competition and Consumer Commission was seeking a fine of $34m to be imposed on the telco giant, alleging Telstra’s senior management ranks had knowingly conspired to deny its wholesale customers such as Optus and iiNet access to install equipment in seven lucrative metropolitan telephony exchanges.

Under standard obligations, Telstra is legally required to allow access to its telephone exchanges so that competitors can install equipment to provide new voice and broadband offerings for customers.

Justice Middleton found that no such conspiracy had existed. “I reject any suggestion that the contraventions occurred as a result of any implicit or express direction from the then chief executive of Telstra to all Telstra employees to make access to competitors difficult,” Justice Middleton said in his judgement.

Telstra admitted in July last year that it was guilty of misleading and deceptive conduct in denying competitors access to its copper network -- but said the breaches were a result of the "chaotic bureaucracy" of the business rather than a deliberate ploy to disadvantage its competitors.

The contraventions -- of which there were 30 separate alleged incidents -- carried a maximum penalty of up to $10m each but Justice Middleton gave Telstra a discount on each breach.

"I have also given a greater discount for cooperation, acceptance of responsibility and for voluntarily implementing a compliance program,” he said.

Telstra won't appeal the decision. The telco vowed to improve business processes.

"Since the start of the case, we have acknowledged that mistakes were made. We accept the judgment which has been handed down. We will not be appealing," a Telstra spokesman said.

"Since these events occurred, Telstra has taken proactive steps to improve our processes in this area, and more generally, to improve service to our wholesale customers.

"We have learned a lot as a result of this process and like many changes at Telstra, we are endeavouring to improve our performance."

He said Telstra had cooperated with the ACCC on its investigation and implemented improved monitoring, processes and training.

As a result, no new exchanges have been capped since April 2008, the spokesman said.

Despite Telstra's penalty the telco's rivals were not entirely pleased with the outcome and reiterated the need for the government to pass legislation aimed at curbing the telco's market dominance.

"This is an example of anti-competitive behaviour from Telstra that the Government’s reform package is designed to stop at its source," Optus director of Government and Corporate Affairs Maha Krishnapillai said.

"Telstra has a very real ability to act unfairly under the present regulatory system, however the damage is done long before Telstra faces any penalties for its actions."