$18 million penalty imposed on Telstra

28 July 2010

Justice Middleton in the Federal Court, Melbourne today penalised Telstra $18.55 million for denying competitors access to infrastructure in contravention of its carrier licence.

Justice Middleton said that Telstra had shown 'no true remorse' for its conduct, 'nor an appreciation of the seriousness of the admitted contravention.'

Telstra admitted to contravening the law by refusing access to other telecommunications providers in seven key metropolitan exchanges in Perth, Melbourne, Adelaide and Brisbane for the connection of their broadband equipment.

Telstra maintained to the companies seeking access that the main distribution frames in these exchanges were "capped", where in fact, there was capacity or it could have been made available.

In handing down today’s decision, Justice Middleton noted that Telstra was in an overwhelming position of bargaining strength and "has control over its exchanges and the power to allow or refuse access".

Justice Middleton was critical of Telstra’s compliance policies, "the admitted contraventions demonstrate substantial non-compliance by Telstra with its legal obligations."

He found that in the period from 2006 to 2008: "Telstra took no steps to develop a culture of compliance with its access obligations under the Trade Practices Act and the Telecommunications Act."

The ACCC had put a penalty of $40m to the court while Telstra submitted that the appropriate penalty was in the order of $3-5 million. The total penalty imposed by the court was $26.5 million, however Justice Middleton gave Telstra a 30 per cent discount for cooperation, acceptance of responsibility and for implementing a compliance program.

ACCC chairman Graeme Samuel said the ACCC welcomed the substantial penalty imposed on Telstra by the court.

"The penalties imposed make it clear that large companies need to ensure they comply with their legal obligations.

"The ACCC was of the view that Telstra had engaged in serious conduct in breach of the Trade Practices Act and the Telecommunications Act. The ACCC’s decision to pursue high penalties in this matter has been vindicated."

"The purpose of access obligations is to encourage downstream competition for the benefit of consumers. The failure to comply with those obligations impedes that competition and therefore harms consumers."

Today, the court found that Telstra had contravened standard access obligations to permit interconnection of facilities to enable the supply of the ULLS and the LSS to access seekers. The court also declared that Telstra had breached an access regime in the Telecommunications Act 1997 which requires Telstra to provide access to its facilities. Both the standard access obligations and the access regime in the Telecommunications Act are conditions of Telstra's carrier licence.

"In this case, the conduct occurred during a critical time of DSL based broadband growth. Telstra had both the incentive, and the ability, to prevent access seekers from deploying their own equipment," Mr Samuel said.

"The ACCC will continue to vigorously pursue high penalties against corporations that break the law," Mr Samuel warned.

Release number: 
NR 149/10
Media enquiries: 
Mr Graeme Samuel - (03) 9290 1812
Ms Lin Enright - (02) 6243 1108