Telecom New Zealand

Telecom New Zealand, Ltd. (TNZ) has been fined $352,600US for claiming one of their broadband plans offered “unlimited data usage and all the internet you can handle,” and then promptly throttled speeds to just above dial-up for some users.  The company pled guilty in Auckland District Court to 17 charges brought against it for misleading customers. Under the New Zealand Fair Trading Act, companies must be honest with customers about what their products and services deliver, and may not engage in “gotcha” fine print that radically departs from the marketing campaign for the service on offer.

The case stems from claims made in 2006 that TNZ’s Go Large broadband plan included “unlimited data usage and all the internet you can handle.”  Customers who flocked to the Go Large plan soon discovered “unlimited” meant “limited.”  Customer complaints rolled in when subscribers discovered the plan’s broadband speed was heavily throttled by “traffic management” which dramatically reduced speeds for file sharing networks and other downloading during peak usage times.  Many complained Go Large’s throttled speeds were slower than those on their usage-capped former Telecom plans.

Customers wading through the fine print finally discovered the reason for the terrible speeds.  The company disclosed it used “traffic management” technology to artificially lower speeds during peak usage times and for certain applications that used a lot of bandwidth.  In December 2006 the company quietly expanded that fine-print to broaden the use of traffic management on certain Internet applications to lower speeds at all times of the day and night for every customer.  This for a plan that promised unconstrained speeds.

New Zealand’s Commerce Commission was not impressed and accused the company of not disclosing relevant information to customers, and failed to make sure their service lived up to its marketing hype.

Telecom stopped offering the now-infamous Go Large plan in February 2007, and rebranded it Big Time.  The latter plan continues to offer “unlimited usage” but more clearly discloses the traffic management policies that limit customer speeds.

The company has already paid $8.4 million in refunds to nearly 97,000 customers, and has agreed to an additional $44,000 in reparations to nearly 2,000 additional customers.

Company officials apologized for the misleading advertising, stating “we failed to adequately disclose various qualifications for our plans and we apologize for this.”

[flv width=”480″ height=”292″]http://www.phillipdampier.com/video/nzbroadband.flv[/flv]

Telecom New Zealand’s Big Time plan ($43US per month – add $7US per month if you do not use TNZ for home phone service) doesn’t promise any particular speed, just unlimited use. New Zealand gets two choices: usage capped or speed throttled broadband.  Watch this video and ponder what it would be like to get stuck with this kind of service from your broadband provider. (3 minutes)