Telstra will provide refunds totalling up to $45 million to approximately 1.5 million telephone customers following agreement between the ACCC and Telstra in relation to Telstras ServiceNet Wiring Maintenance plan (previously known as the Wiring Repair Plan*).
"The refunds address the concerns of the ACCC, under the Trade Practices Act, that Telstra did not properly inform customers of the terms and conditions of the telephone wiring maintenance plan and Telstra's action in moving customers to the plan in 1989," ACCC Chairman, Professor Allan Fels, said today.
The Telstra settlement is generous and shows that Telstra has dealt with this matter fairly and in a way that ensures that affected customers are properly compensated.
"The WRP was introduced by Telstra in 1989 after legislative amendments which meant Telstra no longer owned wiring past customers' first telephone socket in residential and business premises. Telstra continues to own, maintain and repair connections up to the first socket.
"The change was intended to introduce competition into maintenance and repairs for telephone sockets, after the first socket, and to give consumers the option to carry their own risk, and costs, associated with any fault in succeeding extension wiring or sockets.
"Under the WRP, customers with more than one socket paid 50c per month, then 60c from 1992, for a kind of maintenance/insurance WRP under which Telstra would continue to maintain all wiring and repairs.
"In 1995, the ACCC and other agencies received a large number of complaints from consumers following Telstra advice that the cost of the WRP was to rise to 95c. Consumers alleged that they did not know they were part of the WRP and had not asked to join.
"The ACCC alleged that the 'automatic' method of introducing the WRP in 1989, the lack of information about its terms and conditions and the failure to itemise the WRP as part of Telstra's bills meant no valid contract between Telstra and customers existed. The ACCC alleges Telstra had no right to charge for the WRP, or attempt to enhance the WRP.
"The ACCC believes Telstra engaged in misleading and deceptive conduct in breach of the Trade Practices Act in its dealings with customers over the plan.
"Over the past seven years, WRP customers have paid $6 to $7.20 each a year to Telstra for the WRP.
"Telstra and the ACCC have had extensive discussions and Telstra proposes that current WRP customers will receive a refund via their telephone accounts. Customers who have been covered by the WRP since November 1992, but are not currently on the WRP, will be advised via press advertisements to contact Telstra on 1800 052 052. Telstra also will provide all current WRP customers with maintenance coverage for extension telephone wiring and sockets until 31 March 1997 free of charge.
"Telstra will advertise the refund and the options available. A dispute resolution process (to be conducted by the Telecommunications Industry Ombudsman) will deal with complaints associated with the refunds. Telstra will fund an independent auditor to assess Telstras refund procedures.
"After becoming aware of the ACCC's concerns, Telstra cooperated with the ACCC's investigation. It engaged in negotiations with the ACCC to deliver a most satisfactory resolution where customers affected will receive direct compensation. The settlement is handsome and the manner in which Telstra dealt with the problem encouraging. It shows that Telstra is prepared to correct its past conduct by refunding to its customers the fees charged under the WRP.
"The implementation of the refund program appears to reflect a different philosophy on the part of Telstra to that which underpinned the original establishment of the WRP in 1989."
Customers should note that the refunds will be automatically provided to the bulk of consumers. This matter concerns only those customers who have a second or more telephone.
Telstra has advised the ACCC that, due to commercial considerations, it will cease to provide the WRP. To allow an orderly transition, it will provide the WRP free of charge to existing consumers on the WRP for three months. This three month period will allow consumers to investigate the other options open to them concerning repair and maintenance of extension wiring and sockets. Further information concerning consumer options in this regard are available from Austel, TIO and Telstra.
*Telstra renamed the WRP to ServiceNet Wiring Maintenance (SNWM) in October 1995.
MR 132/96
17 September 1996
TELSTRA and A.C.C.C. AGREE ON WIRING REPAIR PLAN REFUND
Background paper
1. Background
The Wiring Repair Plan was introduced by Telstra on 1 January 1989 after legislative changes which transferred ownership of any wiring and additional sockets past the first telephone socket in residential or business premises from Telstra to consumers. Telstra retained ownership of, and responsibility for maintaining and repairing, the lead-in cable (either aerial or underground) up to and including the first telephone socket in residential or business premises. This meant that consumers now owned any existing or new cabling beyond the first telephone socket. The aim of the legislation was to introduce competition to the maintenance of all equipment and telephone lines beyond the first telephone socket, and give consumers a choice of service provider. As a result consumers could choose other licensed cablers to install or maintain extension cabling beyond the first telephone socket.
1. The WRP matter came to the ACCC's attention when in late 1995 a substantial number of consumers received letters from Telstra together with a brochure informing then that the WRP would be:
enhanced and renamed as the Telstra ServiceNet Wiring Maintenance plan (SNWM);
the charge would increase from 60 cents to 95 cents as of 1 January 1996; and
if Telstra did not hear from consumers within 15 days of receiving the letter Telstra would automatically upgrade the consumer to the SNWM.
2. Due to the ACCC raising its concerns with Telstra, Telstra agreed to halt the mail out advising consumers of this change to the WRP. This meant that not all consumers on the WRP received the proposed Telstra letter or brochure advising them of these changes to the WRP.
3. The Wiring Repair Plan
The WRP was a plan under which customers with more than one telephone socket would pay 50 cents per month (increased to 60 cents per month in 1992) per premise in return for which Telstra would upon request from the customer repair and maintain the customer wiring and sockets beyond the first telephone socket (otherwise known as the network boundary point) for no further charge. Therefore the WRP only applied to those customers who had more than one telephone or telephone wiring past the first telephone socket.
1. In 1989 Telstra notified consumers of the introduction of the WRP by a brochure entitled Telecom Topics which was sent to customers with their bill. In addition Telstra placed press advertisements outlining in general terms the legislative changes and the new wiring repair arrangements. The brochure stated that customers who were charged rental for additional telephones and wiring were automatically converted to the WRP.
2. The underlying principle of the Trade Practices Act is that a basic level of information is required before a valid contract can be established and consumers charged for a service under a contract. The Commission contends that at the time of introduction of the WRP Telstra did not provide sufficient information to consumers regarding the terms and conditions of the WRP. Telstra notified consumers of the introduction of the WRP merely by a once only notation on the customers' bill, a bill insert and press advertisements outlining in general terms the legislative changes. In the Commission's view this information was deficient as it did not advise consumers of the fundamental change in the relationship between Telstra and consumers relating to extension wiring, the circumstances surrounding the implementation of the WRP, what the WRP covered, the exclusions under the WRP, the cost of the WRP and other basic information required to establish a valid contract with consumers. The Commission contends that as this basic level of information was missing from the Telecom Topics brochure and the press advertisements placed by Telstra, customers were unable to make an informed decision regarding the WRP or enter into a valid contract with Telstra in relation to the WRP.
3. With respect to notifying customers via a notation on their bill the Commission contends that the lack of itemisation raised concerns under sections 52 and 53 of the Act. A notation appeared on those consumers' bill who in 1989 were to be charged less because of the change from a rental of 50 cents per telephone socket to 50 cents per premises. A notation also appeared in 1992 when the WRP fee increased from 50 cents to 60 cents, and for new customers it has only appeared on their first bill. Once the first notation appeared on a customers bill (then apart from fee increases) the WRP was not separately itemised as it was incorporated into the service and equipment charge on the customers bill.
4. Breach of the Act
The Commission alleges that Telstra's method of introducing the WRP (that is the automatic conversion of customers onto the WRP) and the lack of information given to consumers regarding the terms and conditions of the WRP meant that a valid contract between customers and Telstra was not created. The Commission alleges that as a result Telstra had no contractual right to charge customers for the WRP. It is the Commission's contention that Telstra's conduct was effectively in breach of the following sections of the Act :
Section 52 - Telstra's silence regarding the transfer of consumers to the WRP, the lack of itemising the WRP charge (so consumers were unaware of the continued billing and the nature of the WRP fee), the absence of information about the terms and conditions of the WRP, were misleading or deceptive or likely to mislead or deceive customers under section 52. The lack of information about the WRP and Telstras opt out approach meant that consumers in 1989 were not given an effective choice in respect to the options available to them for the repair and maintenance of extension telephone cabling and sockets;
Section 53(bb) - Telstra's automatic transfer of consumers onto the WRP and billing consumers without providing sufficient information about the WRP amounted to a false representation that the consumer had agreed to acquire the WRP service under section 53(bb);
Section 53(g) - Telstra's claim that it had a valid contract and billing the consumer amounted to a false or misleading representation concerning the existence of a right under section 53(g);
Section 64(2A) - For consumers who had not demanded the WRP yet had been automatically transferred onto it, Telstra would have asserted a right to payment from consumers for an unsolicited service in breach of section 64(2A) each time that it sent them a bill;
Section 46 - The Commission also raised concerns about the possible relevance of section 46 due to Telstras automatic transfer of consumers to the WRP having the potential to foreclose the market to potential new providers of wiring repair services. Section 46 prohibits the misuse of market power to deter or prevent a person from engaging in competitive conduct.
5. Telstras cooperation
After becoming aware of the ACCC's concerns Telstra cooperated fully with the ACCC investigation. Telstra engaged in detailed negotiations with the Commission to deliver a most satisfactory resolution that will compensate all customers on the WRP. The manner in which Telstra assisted the Commission in resolving this matter and implementation of a refunds program appears to reflect a different philosophy on the part of Telstra to that which underpinned the original establishment of the WRP in 1989.
6. The Refund and Undertakings
At the conclusion of lengthy discussions between Telstra and the Commission, Telstra provided the Commission with court enforceable undertakings. These undertakings include an agreement by Telstra to refund all monies paid by consumers (both current and non-current customers of the WRP) to Telstra under the WRP dating back to 21 November 1992. The matter has therefore been resolved through a package delivering a total of approximately $45 million to consumers. Refunds will be provided to approximately 1.4 million customers (this represents 20% of the total customer base) automatically via their telephone accounts. The refunds will be calculated from 21 November 1992 up to the customers next bill.
Current WRP customers will automatically receive their refund via their telephone accounts and do not have to contact Telstra. Customers who have been covered by the WRP since November 1992 but are not currently on the WRP will be advised via press advertisements placed in all major metropolitan, regional and ethnic newspapers to contact Telstra on 1800 052 052. The refunds for both current and non-current customers will be provided progressively from September through until January 1997.
In addition to the refund Telstra has agreed that it will:
refrain from continuing to demand payment from consumers who allegedly joined the WRP after 1989 unless a valid contract between Telstra and the relevant consumer exists;
provide all current customers with a letter outlining the refund process and the options available to consumers in respect of the repair and maintenance of extension telephone wiring and sockets.
publish press advertisements advising consumers that:
(a) if they are currently on the WRP their refund will appear as a credit on their next account;
(b) if they are no longer on the WRP due to a variety of reasons, and can provide basic information to Telstra showing that they were on the WRP they can apply for a refund;
agree to a dispute resolution process to be conducted by the Telecommunications Industry Ombudsman to deal with complaints from consumers regarding refunds associated with the WRP;
fund the cost of a telephone answering system and associated staff and administration costs to be incurred by the Commission in running of the system for the duration of its operation; and
fund the cost of an independent auditor to assess the procedure adopted by Telstra in implementing the refunds to consumers and any disputes arising from this matter; and
pay the Commission's legal costs associated with this matter.
1. Options Available to Consumers
At the time of the introduction of the WRP, various options for repair of wiring and sockets beyond the first telephone socket were available to consumers. These were:
engage Telstra to install or maintain any extension wiring or additional telephone sockets (beyond the first telephone socket);
engage a licensed cabler other that Telstra to install or maintain any extension wiring and additional telephone sockets (beyond the first telephone socket);
do nothing and bear the risk associated with any fault that might appear in the extension wiring or sockets (beyond the first telephone socket);
if consumers wished to repair any fault that appeared or remove the extension wiring they could then either:
(a) engage Telstra on a fee for service basis to repair any damage; or
(b) engage a licensed cabler other than Telstra on a fee for service basis to repair any damage.
2. Withdrawal of WRP
As part of the settlement Telstra has advised the Commission that due to commercial considerations it will cease to provide the WRP. To ensure that an orderly transition is achieved Telstra has agreed to continue providing the WRP free of charge to existing consumers on the WRP for three months. This three month period will allow consumers to investigate the other options open to them concerning repair and maintenance of extension wiring and sockets. Further information concerning consumer options in this regard are available from ACCC, Austel, TIO and Telstra.