The Commerce Commission has begun a probe into Telecom's recent breach of its separation undertakings - a series of commitments it made to the government on being broken into Telecom Wholesale, Chorus (network) and Retail  divisions in March last year.

The watchdog is seeking submissions on the meaning of equivalence of input and non-discrimination obligations for its investigation into the alleged breaches by Telecom on separation undertakings.

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

In August, the Independent Oversight Group found Telecom's so-called loyalty offer, which offered lower wholesale pricing to ISPs who did not move their own gear into its exchanges, was a breach of its separation undertakings (read: Telecom to remove loyalty offer as soon as possible). Kordia (owner of Orcon) and Vodafone had complained to the IOG that they were being penalised by the loyalty pricing deal, which was only available to a company that gave 90% of its business to Telecom Wholesale - effectively excluding any ISP that moved its own DSL gear into Telecom exchanges.

The IOG then passed the issue on to the Commerce Commission, which has now launched its own investigation.

Telecom faces a fine of up to $10 million for breaching its undertakings. Any fine would be decided by the courts once the commission wraps up its investigation.

Consultation documents can be found here on the commission’s website. Submissions on the draft report are due by Friday October 30.

This week NBR reported that Telecom was found guilty by the High Court at Auckland on a case brought against it by the commission which alleged the company had breached the Commerce Act.

Telecom is expected to pay a $10 million fine for anti-competitive behaviour and for detering and preventing competition in the business-to-business high-speed data transmission market.

Telecom said this week it had been disappointed with the result. It is not yet known whether the telecommunications giant will appeal Justice Rodney Hansen's decision.