Telco contracts 'unfair': NZ ComCom

Spark, Vodafone NZ, CallPlus, Orcon, Flip, Two Degrees, and MyRepublic were found to contain unfair standard contract terms, with all agreeing to amend their practices.

The New Zealand Commerce Commission (ComCom) has released its research into the telecommunications industry, finding that seven major telcos contain potentially unfair terms in their standard contracts.

The investigation was undertaken in response to the Fair Trading Act 1986 amendments that came into force in March 2015, equipping the ComCom with the ability to investigate unfair contract terms and enforce compliance by commencing proceedings under Section 46H of the Act.

The amendments, contained under s26A and Part 4A at Sections 46H to 46M of the Act, prohibit unfair terms in all standard consumer contracts.

As part of its investigation, the ComCom reviewed telcos Spark, Vodafone New Zealand, CallPlus, Orcon, Flip, Two Degrees, and MyRepublic. Combined, these telcos make up almost 100 percent of New Zealand's mobile market, and over 94 percent of the fixed-line market.

The telecommunications sector was targeted after being identified by the consumer watchdog as having one of the highest numbers of consumer complaints.

"Overseas regulators told us in their experience, it was an industry in which potentially unfair terms were common," ComCom commissioner Anna Rawlings said when releasing the report on Wednesday morning.

"In addition, many of the past complaints we had received about unfair contract terms related to telecommunications contracts."

Of the seven telcos, only MyRepublic had not reviewed its contract terms in order to comply with the new law, claiming this had been an "oversight" that it would remedy immediately.

However, despite the other companies having reviewed their contracts, the ComCom found 66 contact terms between them that it deemed to be "potentially unfair".

For New Zealand's incumbent telco Spark, the commission found nine potentially unfair terms concerning limitation of liability; retention of remaining prepaid credit on termination of the contract; limitation of intellectual property rights; unilateral variation of services; and the responsibility for unauthorised charges.

For Vodafone New Zealand, five non-complying terms were outlined: Limitation of liability; unilateral variation of services; unilateral right to restrict or suspend services; contracting out of the Fair Trading Act; and contracting out of consequential loss.

Flip and Orcon had the same five terms each that were found to be potentially unfair, regarding limitation of liability; charging undisclosed fees; contracting out of consequential loss; and responsibility for unauthorised charges.

Two Degrees had seven terms identified concerning limitation of liability; responsibility for unauthorised charges; unilateral variation of services; and termination without reason.

CallPlus had only one term -- limitation of liability -- while MyRepublic had 34 non-complying terms due to its outdated contracts: Avoiding or limiting performance of the contract; unilateral variation of contract; unilateral interpretation of contract, assignment of contract; liability limitation; variation of service; penalty clauses; and contracting outside of the Fair Trading Act.

As such, the common problematic terms were identified by the ComCom as being limiting or excluding the liability of the company while providing no such limitations for the consumer in return; allowing companies to unilaterally vary the contract; making the consumer responsible for any unauthorised charges; and allowing companies to avoid liability for consequential loss.

After completing its investigation into the seven telcos, the ComCom drew the companies' attention to the potentially unfair terms, also issuing a compliance letter to each of them. All of the telcos agreed to amend their terms, with the ComCom satisfied that the amendments would fully address the concerns.

"This is a great outcome for New Zealand consumers," Rawlings said.

"Most New Zealanders have one or more standard form consumer contracts with a telecommunications company, and they can now be more confident about the fairness of those contracts.

"We were pleased that the telco companies were receptive to our concerns, amending or agreeing to amend the majority of terms, avoiding the need for the commission to consider court action."

Last June, the ComCom revealed a NZ$40 million decline in telecommunications retail revenue for the 2013-14 financial year and NZ$350 million lower than its peak in 2011-12, standing at just NZ$5.17 billion.

Total telecommunications investment increased by NZ$110 million year over year, however, to reach NZ$1.69 billion, with the majority of this going to the New Zealand government's Ultra-Fast Broadband (UFB) rollout.

Combining the UFB with its NZ$300 million Rural Broadband Initiative (RBI), which is funded by an industry levy, the government is guaranteeing peak speeds of at least 50Mbps for 99 percent of New Zealanders by 2025.

By comparison, Australia's National Broadband Network (NBN) aims to cover 100 percent of the population with fibre, hybrid fibre-coaxial, fixed-wireless, or satellite services with speeds of at least 25Mbps by 2020.