Innocent, Innocent, Guilty?
Copyright © 1996 to Bruce Simpson
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In a statement released yesterday by the Commerce Commission,
Telecom's Internet service Xtra was not in breach of the regulations
in its 0800 pricing or by restricting access to its new IP network.
Most industry observers had already picked that the 0800 complaint would fail as Telecom's earlier claims that Xtra received no favours would tally with the huge losses predicted for the ISP in its first few years of operation..
The Commission said of the IP network that the service was still being trialled and had not been commercially launched so a breach [of the act] was unlikely. Reports indicate that this service is in fact a long way from commercial readiness despite the fact it was first mooted almost a year ago.
This just leaves the claims of anti-competitive behaviour relating to the significant levels of loss being incurred by Xtra in an effort to establish a strong position (some would say "dominance") in the marketplace.
Although running a business at a loss was not in itself a breach of the act, using a dominant position for the purposes of eliminating competition is.
In reply to the Commerce Commission's statement, Telecom says it is pleased that two of the issues have been dismissed and said it was "surprised" that the Commission had expressed reservations about Xtra's current pricing and the possibility [?] that at this stage it may be running at a loss. "It is in the nature of a start-up business to run at a loss. Indeed the Commission itself says that this approach is a legitimate business strategy" said Clive Litt, a Telecom spokesperson.
Although it can't be disputed that many start-ups run at a loss during their early years (whether by design or accident), the real crux of the matter will boil down to whether the level of financial support being offered by Telecom to its subsidiary is fair and reasonable or whether it represents an attempt to gain unfair market dominance.
We'll just have to wait until next year to find out.
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