Telecom escapes fine in misleading broadband meter case

As flagged by NBR on Monday, Telecom has admitted breaching the Fair Trading Act after misleading some customers about the amount of broadband data they used.

A settlement with the Commerce Commission (reached October 11 and released today) involves Telecom directly refunding or compensating affected customers - whose numbers have swelled from the 35,000 flagged in June when the company first raised the issue after affected customers took complaints to the media.

No fine was levied, a commission spokeswoman confirmed to NBR. Under the settlement, the commission waived its right to take legal action over the affair.

Telecom said the inaccurate readings for approximately 97,000 customer accounts between October 20, 2010 and July 9, 2011 were due to a software fault in broadband data usage meters. Telecom discovered the fault following complaints from a number of their customers.

The result of the inaccurate readings was that around 47,000 of the customers were impacted in one or more of the following ways:

• Customers had the speed of their broadband service reduced (or ‘throttled’) to dial up speed once the reading reached their data cap.
• Customers upgraded to a more expensive monthly broadband plan to increase their monthly data allowance due to an incorrect perception about their data usage.
• Customers were charged overage fees for the amount of data that they used above their data cap.
• Customers reduced their data usage so as to not exceed their monthly data allowance.
• Customers were charged early termination fees for changing providers as a result of incorrect perceptions about their data usage.

Telecom issued a public statement in June 2011 outlining the fault and their intention to refund affected customers. To date, Telecom has written to their affected customers and has refunded more than $2.7 million.

Compensation terms reached with the Commerce Commission (see full copy end of article) include:

• Affected customers overcharged between the compensation eligibility period (October 20, 2010 to July 9, 2011) will be refunded
• Where an affected customer had their broadband throttled (slowed down) during the period Telecom will refund, for each impacted billing period, charges from the day that customer was throttled until the end of that billing period
• Where an affected customer changed internet service provider, Telecom will refund the early termination fee
• Where an affected customer upraded plans during the period, Telecom will refund the difference
• If an affected customer changes service providers as a result of problems during the period, Telecom will waive any early termination fee
• Where an affected customer advises Telecom they changed their data usage behaviour to avoid breaching (what they thought was) their cap, Telecom will refund 20% of their monthly plan charges for each month they used over 80% of their monthly data allowance during the period

“Telecom brought this issue to our attention as soon as they were made aware by their customers and have co-operated fully with the commission,"  Commerce Commission competition manager said Stuart Wallace said.

"Due to Telecom’s immediate admission of a breach of the Fair Trading Act, followed by appropriate compensation to customers, the settlement is the best possible outcome for those customers and avoids potentially lengthy and costly court hearings paid for by taxpayers."

Today's agreement follows one announced Friday under which Telecom has agreed to pay rivals $31 million in a no-liability settlement over network access charges.

Telecom now has no outsanding issues with the Commerce Commission over the Fair Trading Act or the Telecommunications Act, but does have one outstanding issue ahead of its shareholder vote October 26: the so-called "data tails" case that saw Telecom fined $12 million for overcharging rivals for access a business-to-business broadband service. The company is appealing the decision.

RAW DATA: Telecom's settlement (PDF)