Former Telecom exec involved in breach of Commerce Act now heading MED telco unit

Bruce Parkes is currently Deputy Secretary at the Ministry of Economic Development for the Energy and Communications Branch. Among his responsibilities, according to his profile on the MED website, are ICT policy and the Ultra Fast Broadband plan. “In conjunction with Crown Fibre Holdings, this group will continue to implement work on the ultra-fast broadband policy, with the immediate aim of settling initial negotiations with potential providers,” reads the profile.

In the High Court judgment released yesterday, Justice Hansen imposed a record $12 million fine on Telecom for a breach of the Commerce Act between 2001 and 2004. Telecom is appealing the case. In his judgment Hansen notes that Parkes was among senior company executives to have been involved in what was later found to be an anti-competitive practice:

“Telecom’s strategy was understood and approved at the highest level of management. Bruce Parkes, who headed Telecom’s Industry Services Unit, which was responsible for the development and sale of commercial products to other service providers, said in a memorandum to Ms Teresa Gattung, the then Chief Executive Officer of Telecom: “Our negotiations to date with carriers have been to treat them exactly like other large corporate customers ... carriers such as Telstra are obviously competitors in the retail market for any services but for data they are actually primarily resellers of our retail data services ... and as such are growing the market for our benefit and theirs."

“Mr Stuart Goodin, Telecom’s Strategy and Pricing Manager, worked under Mr Parkes in developing CDPs. He acknowledged in evidence that Mr Parkes’ philosophy was that there would not be price competition between Telecom and other TSPs, only competition on service quality," the judgment reads

Yesterday’s judgment followed a High Court ruling in October 2009 that Telecom unlawfully leveraged its market power to charge competitors disproportionately high prices for wholesale access to its network.

Justice Hansen said in the judgment that the exclusionary effects of Telecom’s conduct “were injurious to competitors, brought significant benefits to Telecom and were damaging to the competitive process.” He also noted that “[t]he breach was the result of a deliberate strategy, apparently sanctioned at the highest levels of Telecom, to price data tails at a level that would preclude price competition between Telecom and other [teleco service providers]”.

When asked about Parkes’ involvement in the Telecom case, ICT Minister Steven Joyce’s office released a statement to Computerworld: “There are a range of people with different experience, including in the telecommunications sector, working at MED. As Deputy Secretary, Bruce is one of a number of people working on the regulatory aspect of UFB. While officials provide advice to Ministers, all significant decisions are made by Cabinet.”

Computerworld sought comment from Bruce Parkes, but was told by the Ministry of Economic Development he was not available for comment.

Update 12.40pm

Labour Communications and IT spokesperson Clare Curran has released a statement calling for a halt to decisions on the broadband rollouts, following Justice Hansen naming Bruce Parkes in his judgment yesterday.

“There are serious questions about it with regards to competition and regulation.

“In the light of the anti-competitive breach found against Telecom in yesterday’s court decision and in the knowledge that Bruce Parkes, who has been named as being at the centre of this case, and who is now the government’s chief adviser on broadband, all broadband decisions should come to a halt,” Clare Curran said.

“The Government is trying to legislate for a 10-year regulatory holiday for Telecom, and Mr Parkes has been involved in the design.

“An independent review must urgently be conducted of both the process and system of the rural broadband initiative (RBI) and the Ultrafast Broadband scheme (UFB).

“Labour calls on Prime Minister John Key and the Minister responsible Steven Joyce to stop broadband decisions right now.

“The review should be undertaken by an international expert as the New Zealand industry is too involved and inter-connected on these issues,” Curran says.