Telecom rebilling lawsuit heats up in NZ

Telecomms carrier Clear Communications is considering its options after Telstra last week issued legal proceedings against Telecom New Zealand, alleging anticompetitive and discriminatory practices.

The court action focuses on carrier rebilling -- where customers with more than one carrier can opt for one consolidated account. However, Telstra has raised other commercial concerns, including data pricing, interconnect pricing, service level guarantees, onerous access code conditions and unexpected outages. Telecom, meanwhile, has signalled it is also withdrawing letters of authority from June.

"This is a significant issue for us," says Clear public affairs manager Clayton Cosgrove. "We've sought clarification from Telecom and partial clarification from Telstra. We're considering a number of options. The critical issue is that Telecom is making a direct assault on the customer's freedom of choice. Only a monopolist could engage in this type of action."

The key to the rebilling argument is the relationship with the customer. For example, vendor A may supply a service and sub-contract vendor B to supply other services. Vendor A could raise vendor B's pricing without vendor B knowing, attracting a higher margin and still keeping its own prices low, thereby creating a false differential. In the customer's eyes, vendor A then appears cheaper than vendor B and is thus most likely to dominate the relationship.

Telecom has a range of services other than those provided under the interconnection agreements and which are available to other carriers, who can essentially "OEM (original equipment manufacture)" them to customers within their own suite of services.

The issue of rebilling was brought to a head by Fletcher Challenge's decision to employ Telstra to manage its telecommunications business. It is expected that Telecom will still be a major supplier to Fletcher Challenge but Telstra now "owns" the relationship.

Rather than receiving multiple bills from Telecom and other suppliers, Fletchers will get one consolidated bill from Telstra. Though Telstra may not have been able to match Telecom's higher discounts, it offers the company other savings in greatly reduced overheads.

It was a tough blow to Telecom, losing one of its biggest customers. Indeed, Telecom has allegedly been undercutting Telstra and Clear, as resellers, to retain its top accounts. That's meant Telecom offering very large discounts below the level of the interconnect (reseller) agreement.

Letters of authority allow third parties to act as telecommunications managers for Telecom customers and give instructions on behalf of the customer to Telecom. Again, this breaks the direct Telecom-customer relationship link.

Telstra's appointment at Fletcher Challenge also falls into this category because Telstra is effectively acting as a facilities manager.

Industry observers say a letter of authorisation would not automatically preclude Telecom from having a direct relationship.

The main worry seems to be that customers who have appointed third-party management companies on a letter of authorisation have done so, so as not to have to deal with Telecom.

There have been a number of small management service companies established in recent times to provide just those services. Analysts say this is a high growth area.

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