Legal issues regarding Telstra position on contracts and the NBN

Michael Patterson (Telstra’s General Manager for Tasmania) and I have been exchanging emails regarding the position for customers who currently have a contract with Telstra and are faced with compulsory disconnection of copper phone and internet services due to the NBN rollout. In particular whether Telstra can use the threat of Early Termination Fees (ETFs) to force clients to transition to an NBN service provided by Telstra and indeed take out a new contract.

Here is my reply to his email:

Hi Michael,

Thanks for coming back to me. You have clarified the position regarding ETFs if services are disconnected on the Disconnection Date (i.e. you won’t charge them). As promised I will publish your letter on the website (http://nbnsurvival.info) along with this reply.

What concerns me is that while you have said you are committed to supporting your small businesses customers as they transition to the NBN, the unwritten proviso in this is that you are only willing to do this if your customers take on the NBN service with you and sign whatever new contract you require.

At the end of the day, you (Telstra) have announced to your customers that you are disconnecting their existing contracted service before the end of the contract, in other words you have given notice that you will be breaking the contract, not the customer. Don’t forget most customers would be only too happy to keep their existing copper services, you are just not allowing them to do this due to your agreement with NBNCo and the ACCC (which the customer is not a party to).

I note that you are making your customers a new offer to replace their services, but as we all know there are several deficiencies in this new product (alarms, EFTPOS, fax etc do not work properly over the phone service you provide), along with the very real risk of significant downtime during the transition. I do not believe you can force customers to take this replacement service. See the Unfair Terms in the TCP Code 4.5.3d

It is completely unreasonable to require a customer to take on a new contract for their NBN service to escape the ETF on the old one. This also contravenes the TCP code (see unfair terms – 4.5.3c). I do not believe you could even force a customer to take on a new contract that has the same end date as the old one (which would be a more reasonable position).

To require customers to keep their services with you right up until the Disconnection Date in order to escape the ETF is also not reasonable. Given that you have announced you are breaking the contract, businesses have to do whatever they deem fit to preserve their services (plan the transition, port numbers etc).

A much more reasonable position from Telstra, is that a client is required to continue to pay for their contracted service until the Disconnection Date, but allow them to actually disconnect before that time (so they can port numbers for example). I doubt even this would be enforceable in law given that you are creating significant costs (management, new equipment etc) for businesses by breaking the contract in the first place. Indeed your customers are required in law to take reasonable steps to limit their costs (which you could be liable for) due to your announced contract breach (for example by reducing their downtime costs by porting numbers before the Disconnection Date).

I am not a lawyer, but I do make it my business to understand the law around telecommunications. I believe the various consumer laws and the TCP code are very clear on this. However I am open to hearing from you that I have got something wrong.

I look forward to hearing from you,

Damian

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