The Commerce Commission has ordered Telecom to notify and refund approximately 1300 customers who it said may have been misled by a broadband promotion in 2008.

Telecom also agreed to pay $75,000 to Consumer New Zealand to assist in the funding of an internet-based tool that lets consumers compare the prices of different telecommunications products.

The Commission said that between April and June of 2008 Telecom marketed its Basic Broadband Plan using the phrase “Get Telecom Broadband at Dial Up Prices”. Under the Basic Broadband Plan consumers could obtain 200MB of data per month at a cost $16.95 for each of the first six months of a minimum 12 month fixed term contract and then at $29.95 for each of the remaining months.

Complaints were received saying that some of the advertising for the promotion failed to accurately disclose the true cost and data restrictions of the plan.

It was alleged that the phrase “Get Telecom Broadband at Dial Up Prices” could lead consumers to believe that the Basic Broadband Plan would cost no more than a comparable dial up plan when, for the second six months of the minimum 12 month contractual term, the price of $29.95 per month was higher than for any of Telecom’s dial up plans. Consumers also complained that the 200MB data cap meant that they would effectively get much less internet usage than they had previously on a comparably priced dial up plan.

“Telecom has admitted that its promotion breached the Fair Trading Act in that its initial television advertising failed to adequately disclose that there was a minimum 12 month contract period and that the Basic Broadband Plan was only available at $16.95 for each of the first six months of the contract and $29.95 per month after that,” said the Commission.

Telecom also admitted that its print and television advertising did not adequately disclose that the Basic Broadband Plan had a data cap of 200MB per month, with an overcharge rate of 2 cents per MB.

As part of the settlement with the Commission, Telecom will refund:

• the first month’s rental of the Broadband Basic Plan at the promotional price;
• any data overcharges that were charged to the customer’s account in the first month;
• any additional amount paid by the customer for a Telecom wireless modem required to obtain the broadband service;
• any amount paid by the customer for wiring charges required to obtain the broadband service;
• any early termination fees charged by Telecom when the customer disconnected their broadband service; and
• an adjustment for inflation.

The refunds will total around $120,000 for around 1300 affected consumers, said the Commerce Commission.