Telecom has pleaded guilty to 17 breaches the Fair Trading Act.

Telecom pleaded guilty to 15 representative charges and 2 specific charges of breaching section 11 of the Fair Trading Act. The breaches related to the company's advertising of its Go Large broadband plan and 'unleashed' broadband plans in late 2006

From August to November 2006, Telecom and Xtra undertook an extensive
nationwide advertising campaign to promote the Go Large broadband plan and
made a number of representations such as "Xtra Broadband is about to be
unleashed!”, “unlimited data usage and all the internet you can handle” and
“maximum speed internet”.

In December 2006, the Commerce Commission launched an investigation following complaints from Xtra customers who found that the internet speed was
constrained, in some cases to dial-up speed.

Some customers also found they experienced slower speeds on their new Go Large plan than on their previous plans. The overall impression of the campaign was that the Go Large plan was unique in that it would offer unconstrained faster speeds and no data caps.

However, further details available in the fine print of advertising and on Telecom’s website gave the disclaimer ‘as fast as a user’s line will allow’ and outlined the possibility of constraints which included a ‘traffic management policy’ for use during peak times and for those using peer-to-peer applications, such as downloading music and movies.

Go not so large
The Commission established that a change made in early December 2006 to how the Go Large plan was administered meant that the traffic management policy applied at all times and across all applications, not just to peer-to-peer
traffic. This meant that in some cases customers were not experiencing
unconstrained speeds.

“Businesses invest time and money in marketing campaigns to attract new
customers. To avoid the risk of breaching the Fair Trading Act business
should ensure that their goods and services can live up to any marketing
hype – in this case Telecom clearly failed to do so,” said the commission's fair trading manager Graham Gill.

“Businesses also need to make sure that any terms and conditions, such as a
traffic management policy, do not alter the overall impression given by an
advertising campaign” Mr Gill said.

$8.4 million in customer compensation
“Telecom has co-operated fully with the Commission’s investigation and has
voluntarily paid around $8.4 million in compensation to approximately 97,000
affected customers. Telecom will pay a further $44,000 in reparation to
1,700 eligible Go Large customers. Telecom stopped offering the Go Large
plan to new customers in February 2007,” Mr Gill said.

The commission said it had developed a set of resources to assist businesses comply with the Fair Trading Act. 

Son of Go Large
In July, Telecom launched Son of Go Large, aka Big Time, a new uncapped plan - although this time the telco was up-front about throttling data.

Telecom's response
Telecom director of home services Ralph Brayham said the company accepted and regretted that some of its advertising was misleading at the time the campaigns were run in 2006.

“We failed to adequately disclose various qualifications to our Go Large and Unleashed plans and we apologise for this. Following complaints regarding the speeds experienced by some customers after the launch of ‘unleashed’, Telecom moved quickly to try to identify the problems.”

In February 2007, Telecom closed the Go Large plan to new customers and proactively provided credits to affected customers. While customers were given the option to move to another plan, at the time only a small number in fact chose to move off the Go Large plan, Mr Brayham said.
 
“In the three years following the Go Large closure we have made significant changes across our broadband portfolio and have learnt a number of lessons from the Go Large campaign.
 
“We have tens of thousands of customers enjoying a new plan with no monthly data cap, called Big Time – and with that plan we have been clear in communicating the traffic management that applies to it,” Mr Brayham added
 
In addition to the credits applied in 2006 and 2007, Telecom is crediting those customers who were on the Go Large plan between October 2006 and December 2006 and who have not already received a credit. Any customer due a credit will be contacted and credited shortly.