Existing contracts


Summary: It is highly likely you can get out of your existing contract and do not have to use your current telecommunications supplier to move to the NBN.

I have come across many small businesses who have phone and internet contracts with their telecommunications provider (usually Telstra) that extend past the deadline for the disconnection of the copper services. Does this mean that you have to use that provider to transition to the NBN with? The answer is almost certainly no.

In a nutshell a contract for telecommunications services (phone and internet) is an agreement for the provider to provide a service and you to pay for it for a specific period of time. Neither side can make a change to this situation without agreement from the other. The provider cannot for example increase their price, force you to take on another service or substitute a lesser service part way through the contract period. This has significant implications when transitioning to the NBN.

Due to the copper switchoff occurring in several areas of Tasmania beginning in May 2014. The providers will be unable to provide exactly the same service (telephone line and ADSL Internet) as they are providing now beyond the switchoff date. They have to substitute an alternate service over the NBN. Unfortunately due to limitations in the phone service provided over the NBN, devices that send data (Fax, Alarms, EFTPOS etc) do not work, or do not work as reliably. Telstra, for example, have recognised this and are offering to install a new “data only” service (actually a type of ISDN2 line), that is a copper based service that is not included in the services that will be switched off at this time. However there are usually extra charges for this.

Under Australian Consumer Law and in particular the relatively new TCP Code that stems from it, if you are in a contract you are entitled to receive exactly the same service (with the same characteristics and price) for the duration of the contract. If the provider is unable to perform their side of the agreement, they can offer a substitute product, however you are under no obligation to take it.

They are terminating the contract, not you

Where it gets confusing (and I believe this is deliberate on the part of the large telcos) is, in this situation, who is cancelling the contract? The large telcos (certainly Telstra) would like you to believe that you are cancelling the contract and therefore they are entitled to charge you a penalty (an early termination fee). However this is not the case, they are terminating the contract.

It is important to remember that most likely you are not requesting any change at all. If Telstra and NBNCo hadn’t announced that they would be shutting off the copper lines, you would be quite happy staying on your standard telephone lines and ADSL internet. They are forcing this change on you.

Although they don’t explicitly say this (which I think is deceptive), when they announce they are shutting off your services, they are announcing that they will be unilaterally terminating your contract with them. You are then entitled to consider your options (including with other providers) to preserve your services and telephone numbers and in all likelihood actually terminate your services before the announced Disconnection Date (the date that Telstra have announced your services will be disconnected). They cannot then turn round and charge you an early termination fee.

You can also see that the old contract will have to be terminated by reading between the lines of communications received from them. For example in this letter, Michael Patterson from Telstra states “… As well, if you’re still within your contract, we can transfer your services to similar plan on the new network, without triggering early termination charges under your current plan, if you move to plan with an equal or higher monthly cost”. He does not say we will keep your current contract because that would break the TCP Code (they are changing the characteristics of the service – unfair terms 4.5.3d). He does not explicitly say in this letter that charges would apply if you went to the NBN with another provider, however he has said this to me separately in an email. However they cannot enforce this under the TCP Code (unfair terms 4.5.3b), because they (not you) are terminating the contract.

A telco also cannot force you to take on a new contract by threatening early termination fees on the old contract. Not only can they not actually charge those fees at at all, but even if they could, doing so would contravene the TCP Code (4.5.3c).

So what do you do?

The first thing to do is find out is if you have a contract at all with your current provider. Assuming you do, the next question to ask is if they intend to honour the contract past the Disconnection Date including keeping the same characteristics and price (for example still allowing you to use a fax, EFTPOS or Alarm system) for the service and that there will be no downtime. They actually have to answer NO to this, but you may not be speaking to someone who actually knows this – you may have to escalate.

Once you have your NO, then confirm with them that they will be terminating the contract and that you therefore will not be charged any Early Termination Fees even if you disconnect the service before the official Disconnection Date (so that you can avoid downtime by planning this and can port numbers etc). More than likely they will attempt to encourage you to take up a new NBN offer, however this is irrelevant and bring them back to your request that they confirm that they will be terminating the existing contract and not be charging you any fees. Whatever you do, do not ask them to actually disconnect you at this time – you are just getting them to waive the contract or at least the termination fees.

Once they have agreed to waive the contract or termination fees, I recommend you get this in writing or by email. At a bare minimum get a reference number for the call. You may need this.

If you are unable to get them to do this, then I highly recommend you contact the Telecommunications Industry Ombudsman. In my experience the TIO is very alive to this issue and are extremely effective in getting a reasonable result. They have the legal ability to ignore the actual contract terms and concentrate on the spirit of the agreement. Once you engage the TIO, the provider is charged an escalating administration fee the longer the dispute goes on, so usually providers capitulate rather than argue.

For more information and help on this issue, feel free to contact me.

Article Name
Dealing with existing contracts
How you can get out of your existing contract when moving to the NBN