S v S
[2009] NZCA 565
•7 August 2009
IN THE COURT OF APPEAL OF NEW ZEALAND
CA192/2008
[2009] NZCA 565BETWEENVODAFONE NEW ZEALAND LIMITED
Appellant
ANDTELECOM NEW ZEALAND LIMITED
Respondent
Hearing:11 and 12 February 2009
Court:William Young P, Glazebrook and Arnold JJ
Counsel:B D Gray QC, A E Ferguson and F C Monteiro for Appellant
C M Stevens and J Woolley for Respondent
M T Scholtens QC and J B Hamlin for Commerce Commission
Judgment:2 December 2009 at 11 am
JUDGMENT OF THE COURT
AThe appeal is dismissed.
BThe appellant must pay costs to the respondent and the Commerce Commission for a complex appeal on a band B basis and usual disbursements. We certify for two counsel.
___________________________________________________________________
REASONS
WILLIAM YOUNG P (DISSENTING) [1]
ARNOLD J [58]
GLAZEBROOK J [138]WILLIAM YOUNG P (DISSENTING)
Table of Contents
Para No
INTRODUCTION [1]
THE STATUTORY SCHEME [7]
THE CONTROVERSY BETWEEN THE PARTIES [11]
THE HIGH COURT JUDGMENT [21]DOES VODAFONE HAVE A RIGHT OF APPEAL OR ONLY A RIGHT TO SEEK
LEAVE TO APPEAL? [22]IS THERE A QUESTION OF LAW? [32]
IS THE PROPOSED VODAFONE METHODOLOGY CONSISTENT WITH
THE TSO DEED? [35]WAS THE APPROACH OF THE COMMISSION ERRONEOUS IN LAW? [42]
OVERVIEW [42]THE CONSISTENCY OF THE SCORCHED NODE APPROACH WITH
THE TELECOMMUNICATIONS ACT [45]
THE APPLICATION BY THE COMMISSION OF THE SCORCHED NODE
APPROACH TO THE POSSIBLE USE OF MOBILE TELEPHONY [49]
WAS THE COMMISSION’S APPROACH ERRONEOUS IN LAW? [50]
Introduction
[1] Telecom New Zealand Ltd was privatised in 1989. Initially, its provision of residential line services was regulated only by the Commerce Act 1986 and specific obligations incorporated in its constitution. These latter obligations were known as the Kiwi Share obligations and are discussed in the Final Report of the Ministerial Inquiry into Telecommunications (27 September 2000) (“the Fletcher Report”). The Fletcher Report examined telecommunication regulation in New Zealand and ultimately led to the enactment of the Telecommunications Act 2001 (“the Act”), which now provides the regulatory framework for the supply of telecommunication services in New Zealand.
[2] In association with the passing of the Act, the Crown and Telecom entered into the Telecommunications Services Obligations Deed for Local Residential Telephone Service (“the TSO deed”) in December 2001. Under the TSO deed, Telecom, as the relevant telecommunications service provider (“TSP”) is required to supply local residential telephone services (“TSO services”) at a regulated cost. Under the Act it may recover, from those defined as “liable persons” (namely other telecommunications companies, including Vodafone), a proportionate share of the net cost, as determined by the Commerce Commission in accordance with the Act, of providing TSO services to commercially non-viable customers (“CNVCs”). This case concerns the methods used by Commerce Commission in its determination of cost for the 2003-2004 year.
[3] Broadly, the Commerce Commission calculated the relevant cost using a model which treated Telecom’s existing core fixed wire network as a given. It did not model the cost on the basis of the existing mobile sites operated by Telecom and its competitors. While the Commission accepted that mobile telephony could meet the required technical standards, it modelled mobile telephony only as an adjunct to Telecom’s existing core fixed wire network.
[4] Vodafone has maintained throughout that the costs should have been calculated on the basis that an efficient service provider would have used existing mobile technology sites except where new ones were required to meet demand. I will refer to this approach as the “Vodafone methodology”. Vodafone submits that by failing to adopt this methodology the Commission has overstated the net cost and therefore overstated the amount that Vodafone and the other liable persons must pay to Telecom.
[5] Telecom, on the other hand, supports the Commission’s approach and also argued before us that the Vodafone methodology would not be in accordance with the relevant TSO deed.
[6] Section 100 of the Act provides for a right of appeal (on points of law only) against determinations of the Commission. Vodafone appealed against the Commission’s 2003-2004 determination but this appeal was dismissed by McGechan J on the basis that it did not raise a point of law: HC WN CIV-2007-485-826 18 December 2007. Vodafone now appeals (and in the alternative seeks leave to appeal).
The statutory scheme
[7] The case falls to be determined under Part 3 of the Act as it was prior to the commencement of the Telecommunications Amendment Act (No 2) 2006. Although significant portions of Part 3 were amended by Telecommunications Amendment Act, the transitional provision for TSO determinations in s 63 of the amending Act makes it clear that these amendments do not apply for the purposes of this appeal.
[8] Part 3 of the Act provides for the Commission to issue a final determination (ss 90 – 92) which must be preceded by a draft determination (ss 86 – 88).
[9] Sections 83 and 84 provide:
83 Calculations of net cost and auditor's report must be given to Commission
Not later than 60 working days after the end of each financial year of a TSP under a TSO instrument … , the TSP must provide to the Commission—
(a)calculations of the net cost of complying with the TSO instrument during the financial year; and
(b)a report prepared by a qualified auditor (the auditor's report) that includes a statement of whether or not the calculations comply with—
(i) any prescribed requirements relating to those calculations; or
(ii)if there are no prescribed requirements, any requirements of the Commission.
84 Considerations for determining net cost
(1)Subject to subsections (2) and (3), in calculating the net cost under section 83, preparing a draft determination of the net cost under section 88, and determining the net cost under section 92, all of the following matters must be taken into account:
(a)the range of direct and indirect revenues and associated benefits derived from providing telecommunications services to commercially non-viable customers, less the costs of providing those telecommunications services to those customers:
(b)the provision of a reasonable return on the incremental capital employed in providing the services to those customers.
(2)In preparing a draft determination of the net cost under section 88 and determining the net cost under section 92, the Commission—
(a)may choose to not include profits from any new telecommunications services that involve significant capital investment and that offer capabilities not available from established telecommunications services; and
(b)must not include any losses from telecommunications services other than services that the TSO instrument requires the TSP to provide; and
(c) must consider the purpose set out in section 18.
(3)In calculating the net cost under section 83, the TSP must comply with any requirements of the Commission relating to the application of subsection (2)(a) to (c).
(4) In this section,—
established telecommunications services means telecommunications services that are not new telecommunications services
new telecommunications services means telecommunications services that were first provided in New Zealand within 5 years before the commencement of the financial year to which the calculation of the net cost relates.
[10] Two other sections are also important, the s 5 definition of “net cost” and the s 18 explanation of the relevant legislative purpose. Section 18 appears in Part 2 of the Act but is relevant to the present exercise because of s 84(2)(c). These provisions are in these terms:
5 Interpretation
In this Act, unless the context otherwise requires,—
…
net cost means the unavoidable net incremental costs to an efficient service provider of providing the service required by the TSO instrument to commercially non-viable customers
18 Purpose
(1)The purpose of this Part and Schedules 1 to 3 is to promote competition in telecommunications markets for the long-term benefit of end-users of telecommunications services within New Zealand by regulating, and providing for the regulation of, the supply of certain telecommunications services between service providers.
(2)In determining whether or not, or the extent to which, any act or omission will result, or will be likely to result, in competition in telecommunications markets for the long-term benefit of end-users of telecommunications services within New Zealand, the efficiencies that will result, or will be likely to result, from that act or omission must be considered.
(3)Except as otherwise expressly provided, nothing in this Act limits the application of this section.
(4) Subsection (3) is for the avoidance of doubt.
The controversy between the parties
[11] Since the enactment of the 2001 legislation, the Commission has engaged in prolonged examination and consideration of the assumptions on which it should calculate the net cost to an efficient service provider of providing the relevant TSO services to CNVCs. An important issue the Commission had to address was the extent to which its modelling should be based on Telecom’s existing infrastructure.
[12] At a very broad level, there are two possible general approaches, “top down” and “bottom up”. On a top down approach, the Commission would start with the actual costs incurred by Telecom and would then adjust them for any perceived inefficiencies. On a bottom up approach, the Commission would create an engineering model to estimate an efficient cost benchmark for the provision of the services. A completely bottom up model involves a “scorched earth” or “scorched network” approach as it scorches (ie ignores) the entire existing infrastructure.
[13] The Commission has adopted, as something of a compromise, what is known as a “scorched node” approach. It has identified exchange service areas (“ESAs”) which generally correspond to the historical nodes (switches and points of interconnection) in the Telecom network. It then seeks to identify clusters of CNVCs by comparing the access and switching costs associated with them to the standard residential line rentals and supplementary income which they generate. In its modelling, the Commission treats the existing core network, including the location of the nodes, as a given (save that a few very small exchanges have been optimised) but the downstream access network is “scorched”. The effect is that costs associated with the nodes and the downstream access network are capped by the cost of providing standards-meeting services using optimised technology. This approach is bottom up for the nodes and local access network and top down for the core network.
[14] The Commission’s willingness to treat the nodes and access network as scorched is primarily relevant as and when new technologies that meet the service requirements specified in the TSO deed become available.
[15] The 2001-2002 determination was prepared on the basis of the scorched node approach, with the Commission adopting a wireless technology price cap in identified TSO areas where a wireless solution using multi-access radio (“MAR”) was modelled.
[16] A similar approach was adopted in the 2002-2003 determination. In this determination, the Commission recognised that a second form of wireless technology, wireless local loop (“WLL”), was capable of providing TSO services at the required standard. So for those clusters of CNVCs for which WLL technology was viable, a WLL cap was imposed.
[17] In the determination for the 2003-2004 year, the Commission continued to use the MAR and WLL caps. It also recognised, for the first time, that mobile telephony was capable of meeting the required service standards. So it adopted a mobile technologies cap for areas in which mobile telephony was the most efficient way to provide TSO services. But it did this in a very qualified way, because it assessed costs by reference to the construction of new mobile adjuncts to the fixed wire network (which were constrained by the location of existing fixed wire nodes). It thus ignored the existing mobile networks (including Telecom’s).
[18] Vodafone’s contention is that if the optimisation principles were applied in a technologically neutral way, the pre-existing mobile network nodes would be considered as a potential means of supplying the TSO service. On this basis, the Commission ought to have treated the existing mobile nodes in the same manner as it treated the existing fixed network nodes.
[19] I will set out the key reasons why the Commission rejected the Vodafone methodology later in this judgment, see [49] below. For now, it is sufficient to note that the Commission was of the view that the Vodafone methodology was inconsistent with its preferred scorched node approach.
[20] I should record that counsel for Telecom sought to defend the Commission’s approach on a rather different basis (which they asserted was “implicit”) in the decision:
(a)An incumbent provider of TSO services to CNVCs would not invest in mobile technology which duplicated the already sunk cost of its access network.
(b)On the other hand the entry (or possible entry) of a challenger in a competitive market for the provision of TSO services, using lower cost mobile technologies, would constrain the incumbent’s recovery of its past efficiently made investment of fixed wire technology. Such a challenger, however, would be required to build a new mobile network.
The High Court judgment
[21] In the judgment under appeal, McGechan J dismissed the appeal on the basis it did not raise a question of law. The essence of his conclusion is captured in the following passage of his judgment:
[52] The case does not concern pure construction of “net cost” within the s 5 definition, or of ss 18, 85 and 92. Nor does it concern the propriety, as a matter of law, of the Commission’s scorched node approach. The issue before the Court is the choice between two competing approaches (models) determining the fact of “net cost” within definition. Put another, and probably a more accurate way, the issue is a choice between two different outcomes as to what is “net cost”: the Commission’s figure, and the figure (unascertained) resulting from the Vodafone way. This is, at heart, a question of fact not law; and moreover is a question of fact to be determined by application of particular expertise located in an expert body, an area into which a Court must be particularly scrupulous not to stray.
Does Vodafone have a right of appeal or only a right to seek leave to appeal?
[22] Section 100 of the Act provides for a right of appeal, confined to questions of law, from relevant decisions of the Commission to the High Court. This section makes no provision either way in relation to further appeals.
[23] On the argument of Vodafone, there is a right of appeal to this Court under s 66 of the Judicature Act 1908 which provides:
66 Court may hear appeals from judgments and orders of the High Court
The Court of Appeal shall have jurisdiction and power to hear and determine appeals from any judgment, decree, or order save as hereinafter mentioned, of the High Court, subject to the provisions of this Act and to such rules and orders for regulating the terms and conditions on which such appeals shall be allowed as may be made pursuant to this Act.
The words, “save as hereinafter mentioned” are a reference to s 67 of the Judicature Act which is immaterial in the present context.
[24] On the other hand, Telecom and the Commission maintain that s 97 of the Commerce Act operates so as to require leave for an appeal to this Court. This section is relevantly in these terms:
97 Appeal to Court of Appeal in certain cases
(1) Notwithstanding anything in any enactment, any party to any appeal before … the High Court against any determination of the Commission who is dissatisfied with any decision or order of the Court may, with the leave of the Court or of the Court of Appeal, appeal to the Court of Appeal; and section 66 of the Judicature Act 1908 shall apply to any such appeal.
(Emphasis added.)
Telecom and the Commission place particular reliance on the words I have emphasised. They maintain that these words mean that the section necessarily prevails over s 66 of the Judicature Act.
[25] The legislation is untidy and I see the interpretation issue as closely balanced. In the end, however, I have concluded that the Vodafone argument is to be preferred.
[26] Section 97 of the Commerce Act forms part of a suite of sections dealing with appeals against decisions of the Commission. The first relevant section, both in logic and sequence, is s 91 which confers, with some exceptions, a right of appeal to the High Court against “any determination of the Commission under this Act”. In this context, it seems logical to construe the expressions “determination” and “decision or order of the Court” in s 97 as a references, respectively, to determinations under the Commerce Act and to decisions of the High Court under ss 93 – 96 of that Act. Indeed when the Commerce Act was enacted (which was prior to the Telecommunications Act) that is all that those expressions could have referred to.
[27] This latter point is not a decisive consideration: see s 6 of the Interpretation Act 1999. Enactments apply to circumstances as they arise. This raises the question whether the enactment of the Telecommunications Act and the creations of rights of appeal from Commission determinations under that Act are “circumstances” to which s 97 can fairly be said to apply. I think that this question is most appropriately answered by reference to the presumed intention of Parliament in relation to the Telecommunications Act.
[28] The most plausible interpretation of the Telecommunications Act is that Parliament intended to create stand-alone appeal rights and pathways and did not intend to adopt the Commerce Act model. The right of appeal under s 100 of the Telecommunications Act is confined to questions of law, whereas under the Commerce Act there is a general right of appeal. As well, the different right of appeal to the Court of Appeal provided for in s 60 of the Telecommunications Act is subject to a leave requirement (albeit one which is expressed in terms which differ from that provided for in s 97 of the Commerce Act). And s 15 of the Telecommunications Act, which identifies the provisions of the Commerce Act which apply to the Telecommunications Act, does not mention s 97 of the Commerce Act.
[29] On the basis that s 97 applies only to Commerce Act appeals, the opening words of s 97 (“Notwithstanding anything in any enactment”) are not of controlling significance because the section as a whole does not apply to appeals under the Telecommunications Act.
[30] Accordingly I conclude that Vodafone has a right of appeal under s 66 of the Judicature Act and not merely a right to seek leave to appeal under s 97 of the Commerce Act.
[31] If I had taken a different view on this point, I would, in any event, have favoured the granting of leave to appeal.
Is there a question of law?
[32] It will be recalled that in s 5 of “net cost” is defined as meaning:
... the unavoidable net incremental costs to an efficient service provider of providing the service required by the TSO instrument to commercially non-viable customers
[33] On the Vodafone argument, the Commission did not apply the statutory test. Instead, the Commission determined “net cost” by reference not just to the relevant statutory language but also its own self-imposed requirements that the result must accord with its preferred scorched node methodology.
[34] If this complaint is made out, it necessarily raises a question of law.
Is the proposed Vodafone methodology consistent with the TSO Deed?
[35] To date the Commission has proceeded on the basis that it is open to Telecom to meet its obligations under the TSO deed by the use of mobile telephony. This is consistent with cl 8 of the TSO deed which provides:
Telecom may use any method or any technology in providing the services it is obliged to provide in this Deed, provided that doing so does not place Telecom in breach of this Deed.
(Emphasis added.)
[36] Telecom accepts that the Commission’s methodology for applying the mobile telephony cap is consistent with the TSO deed. But it argues that the Vodafone methodology is not.
[37] Telecom’s argument proceeds on this basis.
[38] The expression “local residential voice telephone service” is defined in cl 3.3(b) of the Schedule to the TSO deed so as exclude:
calls to or from telephones or devices connected to cellular, mobile radio, paging and other non-PSTN networks
Telecom accepts that this exclusion is not applicable to the Commission model (as the postulated subscriber mobile telephony devices are connected to the public switch telephone network (“PSTN”) at the node). But Telecom maintains that the exclusion means that it is not required to provide calls to and from subscriber telephones connected to mobile networks (as postulated by the Vodafone methodology). Accordingly the net cost of providing such calls would not be within the s 5 definition of “net cost” in s 5 which addresses only services “required” by the TSO deed.
[39] This argument has not been formally addressed by either the Commission or the High Court, and the Commission invited us not to address it either. I think it best, however, to grasp the nettle.
[40] The TSO deed is drafted so as to make it clear that Telecom is not required to provide its customers with free calling to non-PSTN networks (which is why customers must pay for landline to mobile calls). It is likewise not required to provide its customers with the facility to receive free calls from non-PSTN networks, although in practice it does. But there is no logical reason why it should not be able to meet its TSO obligations by providing mobile telephony services. Indeed, to construe the TSO deed in the manner contended for by Telecom would be inconsistent with the technology-neutral policy underlying the Act and which is repeated in cl 8 of the TSO deed.
[41] Accordingly I prefer an interpretation of the exclusion in cl 3.3(b) of the Schedule to the TSO deed so that “telephones or devices” are construed as referring:
(a)Not to the subscribers’ telephones or devices; but rather
(b)To the “telephones or devices” to which the subscribers make calls or from which they receive calls.
Was the approach of the Commission erroneous in law?
Overview
[42] The difficulties with a completely bottom up scorched earth approach are obvious. Such an approach would not permit the recovery of costs associated with long-life network assets which may have been (and presumably were) efficient when first put in place. Investment decisions which were efficient when made and implemented will not necessarily be statically efficient at all future points in time. Modelling on the basis of a completely optimised network would make no allowance for a TSP’s sunk and irreversible costs associated with earlier investment decisions. No real-world telecommunications company would sacrifice its sunk costs in existing and functional infrastructure the moment that better technology becomes available. As well, a bottom up approach based on an optimised network could deter the TSP from investing efficiently in its network as presently configured.
[43] On the other hand, a purely top down model which starts with the TSP’s actual costs is likely to incorporate existing inefficiencies which may not be readily identifiable by the Commission. As well, confidentiality issues around the information which the TSP supplies to the Commission are likely to result in a lack transparency from the perspective of others with a stake in the process (such as the liable persons).
[44] In practice regulators such as the Commission have tended to adopt the scorched node approach (or variations of it) to modelling. As already noted, this has been largely by way of compromise. The implied scorching of the nodes and access networks involves the stranding of long life network infrastructure which may have been efficient when first constructed. And treating the core network as a given necessarily incorporates any inefficiencies associated with that network and results in some lack of transparency in the cost-assessing process. That the scorched node approach is indeed a compromise is illustrated by the willingness of the Commission to engage in some minor core network optimisation (involving small exchanges).
The consistency of the scorched node approach with the Telecommunications Act
[45] The Act gives mixed signals as to the nature of the test which is envisaged.
[46] Some of the relevant provisions can be read as suggesting that the primary focus should be on the TSP’s existing infrastructure. For instance:
(a)Section 84(1)(a) requires assessment of the benefits to the TSP of providing services to CNVCs, less the cost of doing so.
(b)Section 84(1)(b) refers to the provision of a reasonable return on the incremental capital employed in providing services to CNVCs.
(c)Sections 88(a)(i) and 92(a)(i) both refer to the “net cost to the TSP” of complying with the TSO instrument.
[47] I am satisfied, however, that the legislature envisaged an objective test based on a notional efficient operator. I consider that this is made clear by s 5 which relevantly provides:
5 Interpretation
In this Act, unless the context otherwise requires,—
…
net cost means the unavoidable net incremental costs to an efficient service provider of providing the service required by the TSO instrument to commercially non-viable customers
(Emphasis added.)
[48] I regard the Commission’s scorched node model as adopted prior to the 2003-2004 determination as consistent with s 5. An efficient service provider will make long term investments in the infrastructure which are necessary to provide the required services. A system of modelling which operates on the basis that those investment decisions are, in effect, up for grabs, on an annual basis would not make any sense. On the other hand, given that the scorched node construct is so closely associated with the architecture of traditional telephone networks, it can hardly be regarded as implicitly embedded in a statutory scheme which is technology-neutral.
The application by the Commission of the scorched node approach to the possible use of mobile telephony
[49] At this point, it is necessary to set out the reasons given by the Commission for rejecting what I have described as the Vodafone methodology:
36. The Commission has acknowledged in the past that the level of efficiency modelled for TSO purposes is not the maximum level of efficiency. The Commission recognized that the evolution of an efficient network design is restricted to some extent by past decisions. To take account of this constraint, the hypothetical network takes into account a number of Telecom’s network characteristics. Under this “scorched node” approach adopted by the Commission, the costs of an “efficient service provider” are those a provider would incur in providing TSO services using best available technology, but given the location of the TSP’s current network nodes.
37. The Commission nonetheless noted in its first TSO determination that some optimisation is necessary in order to maintain incentives for efficient investment by the TSP. Further, while taking into account Telecom’s existing network characteristics, and adopting reasonable assumptions regarding the level of efficiency modelled, the Commission seeks to model costs in line with the level that might be expected in a competitive environment.
38. Submissions arguing for optimisation to reflect the incremental costs of mobile networks are not aligned with the Commission’s fundamental scorched node paradigm. This paradigm requires any optimisation of the access network to be integrated with Telecom’s current network nodes. In these circumstances, replacement access technologies will have to be cost effective in delivering services as a supplement to a fixed network. In particular, optimisation which relies on economies of scale or low incremental costs derived from existing mobile networks to lower costs will not be accepted by the Commission.
39. The Commission acknowledges that this approach could be challenged as inconsistent with the competitive environment in New Zealand at the time of the TSO, in which mobile services were widely deployed and used. It could be argued that in such circumstances, efficient costs of access networks should reflect those of the overlay mobile networks, even for delivery of service to CNVCs. For example, TelstraClear has argued that an efficient service provider would select the least cost means of providing TSO services to customers, including through purchasing wholesale services from other providers, reflecting market reality.
40. The Commission does not consider that efficient costs of access networks should reflect those of the overlay mobile networks. Such an approach would, in effect, model the outcomes of a tender process for delivery of the TSO, and would depart too far from reasonable standards of efficiency previously adopted by the Commission. Given the essentially non-commercial nature of the service being delivered, the Commission considers that some reasonable bounds need to be placed on the attempt to approximate the costs that would be incurred in a competitive environment. The Commission will accept the lowest cost technology consistent with the scorched node approach.
41. The Commission will remain open to submissions as to forward looking costs of delivery of service to CNVCs, but such submissions need to be consistent with reasonable assumptions about efficiency.
Was the Commission’s approach erroneous in law?
[50] The Commission’s reasons for dismissing Vodafone’s approach were succinct and conclusory:
(a)Vodafone’s approach was inconsistent with the Commission’s scorched node paradigm and accordingly “optimisation which relies on economies of scale or low incremental costs derived from existing mobile networks to lower costs will not be accepted by the Commission”.
(b)The Vodafone approach would require the Commission to model the outcomes of a tender process for the performance of the TSOs, and this would depart too far from reasonable standards of efficiency previously adopted by the Commission.
(c)In light of “the essentially non-commercial nature of the service being delivered, some reasonable bounds need to be placed on the attempt to approximate the costs that would be incurred in a competitive environment”.
[51] Up until the 2003-2004 determination, the Commission had proceeded on the basis that a core network of the kind operated by Telecom was essential to the provision of the services required by the TSO deeds. The wireless technologies which it built into its model were, by their nature, merely adjuncts to the use of that core network. So the Commission’s conclusion in the 2003-2004 determination that mobile telephony was capable of meeting the relevant technical standards introduced a new element.
[52] This factor, when considered in light of the existing and overlaid mobile telephony networks of Telecom and its competitors, changed the nature of the debate. Before, the concept of optimisation of infrastructure involved comparison of existing infrastructure with an optimised but virtual equivalent. This was in a context in which technological development would not normally induce Telecom to replace immediately a less than optimal element of its infrastructure (whether core network or local access network) and thus lose the associated sunk costs. But once mobile telephony is seen as meeting the required technical standards, the relevant comparison was no longer between infrastructure which is there and an optimised but virtual equivalent. Rather it is between two existing infrastructures. Logic might suggest that the cost modelling conducted by the Commission should look to identify which system is the cheaper.
[53] In those circumstances, it was not enough for the Commission simply to rely on its general scorched node preference. Instead it was required to reassess that preference in light of the changed circumstances. Relevant to that assessment are two features of the statutory scheme to which I draw attention.
[54] The first is the word “unavoidable” in s 5. Costs associated with supplying services to CNVCs which could be avoided or reduced by the use of existing mobile telephony infrastructure might be thought to be “avoidable” rather than “unavoidable”. I note that in a discussion paper which was a precursor to its first determination (TSO Discussion Paper and Practice Note – Cornerstones Issues Paper 22 March 2002) the Commission concluded (at [45]) that “unavoidable” did not “expand significantly the meaning of the remaining terms in the definition”. So it treated “unavoidable” as equivalent to “incremental”; in effect as adding nothing to the definition. This is presumably why the Commission did not address the significance of “unavoidable” in the determination in issue before us. I prefer to construe s 5 on the basis of all the words used in it, including “unavoidable”.
[55] The second is s 18, the Part 2 statement of purpose which is incorporated into the Part 3 exercise by s 84(2)(c). At [39] of its decision, the Commission recognised an apparent inconsistency between its rejection of the Vodafone methodology and “the competitive environment in New Zealand at the time of the TSO, in which mobile services were widely deployed and used.” It was content, however, to reject this for reasons which, despite the repetition, I think it right to set out again:
The Commission does not consider that efficient costs of access networks should reflect those of the overlay mobile networks. Such an approach would, in effect, model the outcomes of a tender process for delivery of the TSO, and would depart too far from reasonable standards of efficiency previously adopted by the Commission. Given the essentially non-commercial nature of the service being delivered, the Commission considers that some reasonable bounds need to be placed on the attempt to approximate the costs that would be incurred in a competitive environment. The Commission will accept the lowest cost technology consistent with the scorched node approach.
I consider that the reasons given by the Commission (departure from “reasonable standards … previously adopted” and the need for “reasonable bounds” on attempts to approximate the costs in a competitive environment) do not justify the non-compliance with the statutory purpose of promoting competition.
[56] In short I am persuaded the Commission erred in law when it rejected the Vodafone methodology because it conflicted with its preferred scorched node methodology. In doing so, it treated consistency (or otherwise) with its scorched node model as the controlling consideration instead of going back to, and applying, the key statutory provisions.
[57] I recognise the considerable complexities involved in the exercise required of the Commission and emphasise that my judgment is addressed to the reasons given by the Commission. My approach comes down to the conclusion that the arguments for the Vodafone methodology are more formidable than the Commission recognised and could not lawfully be rejected on the basis of the reasons given by the Commission. In this difficult area, it would obviously neither be right nor practical for a Court to come up with its own determination for the 2003-2004 year. Accordingly, I would allow the appeal but would leave it to the Commission to reconsider the determination. I emphasise that I have not concluded that on such reconsideration the Commission would necessarily be required to adopt the Vodafone methodology.
ARNOLD J
Table of Contents
Para No
INTRODUCTION [58]
VODAFONE’S KEY CONCERN [61]
THE CONTEXT OF PART 3 [64]
THE PROCESS ENVISAGED BY PART 3 [78]
THE NEED FOR A METHODOLOGY OR MODEL [79]AN EVALUATIVE PROCESS [85]
THE COMMISSION’S TREATMENT OF WIRELESS TECHNOLOGY [97]
VODAFONE’S CRITICISMS [103]
MY EVALUATION [108]DOES VODAFONE’S APPROACH REQUIRE A SCORCHED EARTH METHODOLOGY? [109]
DID THE COMMISSION GIVE PROPER EFFECT TO THE NET COST DEFINITION? [117]
THE SCOPE OF THE COMMISSION’S TASK? [126]
DID THE COMMISSION TAKE PROPER ACCOUNT OF THE PURPOSE
STATEMENT IN S 18? [130]
DECISION [137]
Introduction
[58] I have had the opportunity to read William Young P’s judgment in draft. Because I have reached a different conclusion on the principal issue in the appeal, I write separately.
[59] This case concerns the Commerce Commission’s “Final Determination for TSO Instrument for Local Residential Service for period between 1 July 2003 – 30 June 2004” dated 23 March 2007 (“the 2003 - 2004 Determination”). Broadly, the point at issue is whether the Commission’s treatment of the mobile technologies is consistent with Part 3 of the Telecommunications Act 2001 (“the Act”).
[60] My judgment is structured as follows. I begin by briefly summarising Vodafone’s key concern with the 2003 - 2004 Determination. I then make two general observations about Part 3, one concerning the context of Part 3 and the other concerning the nature of the process contemplated by Part 3. Finally I discuss the particular issue that Vodafone has raised, and in the course of that discussion I will explain why I disagree with the President’s analysis.
Vodafone’s key concern
[61] Mr Gray QC for Vodafone described the central issue in this case as being whether the Commission had calculated the net costs to an efficient telecommunications service provider (“TSP”) of providing local residential telephone services in accordance with Telecom’s telecommunications service obligations (“TSO”) instrument consistently with:
(a) the definition of “net cost” in s 5 of the Act; and
(b)the purpose set out in s 18 of the Act.
[62] He submitted that the hypothetical efficient TSO service provider which the Commission was obliged to utilise in its analysis was one which “owned a network which incorporated fixed line and mobile networks”, that is, a TSP having, in this respect, Telecom’s characteristics. Such an efficient TSO service provider would, he argued, have supplied at least some commercially non-viable customers (“CNVCs”) from its mobile network as it could have done so more cheaply than from its fixed wire network, even if that latter network was optimised as required by the Commission. The Commission’s refusal to entertain this approach was, Mr Gray submitted, wrong in principle and inconsistent with s 18. There was, therefore, an error of law which this Court should correct on appeal.
[63] I will set out and comment on Vodafone’s arguments in more detail later in this judgment.
The context of Part 3
[64] Part 3 contains “provisions about the supply of certain telecommunications services under TSO instruments, the enforcement of those instruments, and contributions payable by certain telecommunications service providers to the suppliers of those telecommunications services”: s 4(f) of the Act. TSO instruments are contracts between the Crown and TSPs for the supply of telecommunications services to groups of end-users who might not otherwise be supplied on a commercial basis or at an affordable price: ss 5 and 70. They have a strong public or social service element to them.
[65] Vodafone’s challenge to the Commission’s approach relates to the contributions payable by it and other TSPs to Telecom in relation to local residential telephone services (TSO services) provided under the Telecommunications Services Obligations Deed for Local Telephone Service (“the TSO Deed”), entered into by the Crown and Telecom in December 2001.
[66] In determining contributions under Part 3, the Commission must consider the purpose set out in s 18: s 84(2)(c). Relevantly, s 18 provides:
Purpose
(1)The purpose of this Part [ie, Part 2, which deals with the regulated supply of services between TSPs] and Schedules 1 to 3 is to promote competition in telecommunications markets for the long term benefit of end-users of telecommunications services within New Zealand by regulating, and providing for the regulation of, the supply of certain telecommunications services between service providers.
(2)In determining whether or not, or the extent to which, any act or omission will result, or will be likely to result, in competition in telecommunications markets for the long-term benefit of end-users of telecommunications services within New Zealand, the efficiencies that will result, or will be likely to result, from that act or omission must be considered.
…
[67] To understand that purpose, it is necessary to place Part 3 of the Act in its context. As the President has noted, when Telecom was privatised, the Crown and the purchasers of Telecom’s shares entered into an arrangement concerning the provision of services to residential customers. Telecom’s articles of association provided for a Kiwi Share and conferred various rights on the Kiwi Shareholder (the Minister of Finance). Under the arrangement, Telecom was obliged to continue to provide “ordinary residential telephone service” (most importantly, access at a capped line rental and free local calling) on defined terms (referred to as the Kiwi Share Obligations or KSO): see Clear Communications Ltd v Telecom Corporation of New Zealand Ltd (1992) 5 TCLR 166 at 182 (HC) and Final Report of the Ministerial Inquiry into Telecommunications 27 September 2000 (“the Fletcher Report”) at [3.4] and [9.1].
[68] To the extent that the KSO prevented Telecom from recovering from its residential customers the cost of providing “ordinary residential telephone service”, it was obliged to subsidise that service from revenues from other services, for example services to business customers or toll services. Telecom considered that such cross-subsidies had the potential to distort the competitive process. This was because they would impose what was effectively a regulatory cost on Telecom in respect of its cross-subsidising services, which typically were services for which there was competition. As a consequence, Telecom would have to carry a cost which its competitors did not share in relation to these competitive services, in circumstances where those competitors benefited from the ubiquity of reach resulting from the subsidised service. Telecom considered that the KSO did give rise to such cross-subsidies, and sought some contribution to the cost of the KSO from its competitors in its interconnection charges. This was one of the factors that gave rise to the many disputes within the industry, as evidenced by the Clear/Telecom litigation, for example Telecom Corporation of New Zealand Ltd v Clear Communications Ltd [1995] 1 NZLR 385 (PC).
[69] Part 3 was introduced following the Fletcher report and was intended in part to address this issue. In introducing the Bill the Minister of Communications, Hon Paul Swain (9 May 2001) 592 NZPD 9116, said:
The problem in the past has been the way in which other telecommunications providers have been required to meet the costs of Telecom’s Kiwi share obligations. The practice has been for Telecom to include a premium on the price for interconnection with its network, which was not transparent or competitively neutral. Part 3 implements a transparent and neutral mechanism to deal with contributions to the cost of telecommunications service obligations, including the Kiwi share obligations.
[70] The KSO was replaced by the TSO Deed. It is a deemed TSO in terms of s 71 of the Act. (The TSO Deed is one of two TSO instruments under the Act, the other being with a different TSP and relating to services to the hearing impaired.)
[71] The mechanisms in Part 3 enhance competition in a number of different ways. The Commission discussed this in its TSO Discussion Paper and Practice Note – Cornerstones Issues Paper 22 March 2002 (“the Cornerstones Issues Paper”) at [31] – [36]. It said:
35.The Commission considers that the key impact of the section 18 purpose statement on Part 3 of the Act, other than where it is cited specifically in the Part itself, is to require the Commission when making determinations to minimise any distortion to the competitive process or to efficient investment.
(Emphasis added.)
[72] It then proposed the following list of criteria going to these two aspects – promoting competition and achieving efficiency – (at [36]):
Promoting competition
· maintaining competitive neutrality;
· ensuring the regime does not impede investment which promotes competition in telecommunications markets.
Achieving efficiency gains
· adopting a long-term perspective when calculating avoidable cost;
· maximising incentives on the [telecommunications service provider] to minimise its costs in providing the required services;
· maximising incentives on the [telecommunications service provider] to investigate, and where appropriate implement, new cost reducing technologies;
· minimising any impact on the demand of TSO customers for non-TSO services; and
· minimising any impact on the demand for all telecommunications services by non-TSO customers (including the impact of the TSO levy passed onto the end-users of services provided by other telecommunications service providers – liable persons).
[73] As this list of criteria highlights, competition/efficiency analysis is multi-faceted. It must take account of the perspectives of all TSPs (ie, the TSO service provider and other TSPs and potential TSPs) and of consumers. It is likely to involve trade-offs – particular considerations may pull in different directions, short-term and long-term perspectives may conflict and so on.
[74] To illustrate, I agree with the Commission that, properly applied, the Part 3 process should minimise any distortions to the competitive process. But minimising such distortions relates to both the TSO service provider and other TSPs. For example, looking at it from the perspective of the TSO service provider and taking Telecom as an example, if Telecom does suffer a cost burden as a result of its TSO Deed obligations, Part 3 provides a mechanism for the sharing of that cost burden among “liable persons”. “Liable persons” are essentially other TSPs which take advantage of the ubiquity of reach resulting from the TSO Deed. In terms of s 5 of the Act:
liable person, in relation to a TSO instrument, means (except when they are the TSP),–
(a) Telecom; and
(b)a person–
(i)whose network is interconnected with a fixed PSTN operated by Telecom; and
(ii)who provides a telecommunications service in New Zealand to end-users by means of some component of a PSTN that is operated by the person.
(Emphasis added.)
The section defines “fixed PSTN” as follows:
fixed PSTN–
(a)means a PSTN, or that part of a PSTN, that connects an end-user’s building to the local switches or equivalent facilities; and
(b)includes those local switches or equivalent facilities.
(Emphasis added.)
Accordingly, liable persons are TSPs which interconnect with the switch/end-user component of Telecom’s network. By sharing among liable TSPs any legitimate cost burden incurred as a result of supplying TSO services, the Part 3 process should eliminate or minimise what would otherwise be an artificial distortion (an asymmetric cost structure arising from a regulatory obligation) in competitive telecommunications markets.
[75] However, taking a broader perspective, Part 3 enables the Commission to ensure that liable TSPs (including Telecom) meet any legitimate cost burden from the TSO Deed in a way that is competitively neutral. This allows TSPs to compete against each other in competitive markets solely or principally on the basis of their relative efficiencies in providing the contested services.
[76] In terms of efficiencies, there is a helpful discussion in the Commission’s paper, A Guide to the Role of the Commerce Commission in Making Access Determinations Under the Telecommunications Act (28 May 2002) (“the Guide”), which is also relevant to the Part 3 process. The Guide identifies the three types of economic efficiency – allocative, productive and dynamic: at [64]. It states that allocative efficiency is difficult to apply in the telecommunications industry as the presence of high fixed and common costs means that prices must be set above marginal costs. It also notes that there may be tensions between allocative and productive efficiency on the one hand and dynamic efficiency on the other, which means that trade-offs must be made. In that context, time horizons may be important: at [65] – [69]. As the Commission noted in the Cornerstones Issues Paper (see [72] above), the Part 3 process must maintain incentives for efficient investment by, in this case, Telecom. But it should also place pressure on Telecom to be efficient in the provision of the regulated service by not allowing recovery of inefficiently incurred costs.
[77] One final point about context. In introducing the Bill, Hon Paul Swain said that the Government intended to allow for the possibility of holding tenders for the provision of these regulated services. The Minister said (at (9 May 2001) 592 NZPD 9116):
The Kiwi share obligations contained in Telecom’s constitution are currently the only example of a telecommunications service obligation. However, the bill leaves open the possibility of declaring other telecommunications service obligation instruments in the future, and allows for the possibility of putting such obligations out to competitive tender.
As I read Part 3, there is no reason why such a tender process could not be conducted, but a difficulty may then arise as a result of the definition of liable persons with its requirement for interconnection with the switch/end-user component of Telecom’s network.
The process envisaged by Part 3
[78] There are two features of the process envisaged by Part 3 which require emphasis at this point. The first is that to implement the process, the Commission had to develop a methodology or model which it could apply from year to year. The second is that in developing and applying that methodology or model, the Commission was necessarily engaged in an evaluative process. I now develop these two points.
The need for a methodology or model
[79] Subpart 2 of Part 3 sets out the annual procedure for determining the amount that service providers must contribute in respect of TSO obligations. It provides for a series of steps within a relatively constricted timeframe:
(a)Within 60 working days of the end of the financial year:
· all “liable persons” must provide the Commission with specified data: s 81;
· Telecom must provide the Commission with calculations of the net costs of complying with the TSO Deed in the financial year: s 83.
(b)Within 120 working days of the end of the financial year, the Commission must make reasonable efforts to prepare, and give public notice of, a draft determination which contains the information specified in s 88. This includes Telecom’s net cost of complying with the TSO Deed in the financial year, plus supporting information and the amount of revenue that Telecom and each liable person receives during the financial year from providing services over the Telecom network or its own network. The public notice must give a closing date for submissions, which must be not less than 20 working days after the giving of the public notice: s 86.
(c)Within 40 days of the closing date for submissions, the Commission must make a reasonable effort to prepare, and give public notice of, a final determination containing the matters specified in s 92 and provide it to all liable persons.
[80] Given that this is an annual process which is intended to be completed within a reasonably tight timeframe, it seems to me inevitable that the Commission will have prepared a methodology or model by reference to which it can deal with the data once it is provided. Put another way, it cannot have been contemplated that the Commission would start each annual process with a blank sheet of paper. As the Commission has noted, “network cost modelling exercises are generally resource-intensive and costly”: 2001 - 2002 Determination at [449].
[81] The Commission did in fact develop a core methodology following an iterative process involving consultation with members of the telecommunications sector. In early 2002 the Commission released two papers, the Cornerstones Issues Paper and the TSO Discussion Paper and Practice Note – Implementation Issues Paper 19 April 2002 (“the Implementation Issues Paper”). Having received written responses to these papers from various parties, including Telecom and Vodafone, the Commission held a four-day conference in mid July 2002 at which those who had responded were invited to elaborate on their views. The Commission then reported back to the industry on its thinking following the conference in a paper entitled TSO Position Paper 30 September 2002, although that paper did not record final decisions. The Commission held a TSO modelling workshop for industry members in November 2002 at which it introduced a model that it proposed to use, namely the Hybrid Cost Proxy Model (HCPM) developed by the United States Federal Communications Commission for optimisation and costing of access network components. The Commission also developed a purpose-built model for design and costing of switching and transport components (“CostPro”). (These are referred to in more detail at [93] below.) In April 2003 the Commission released its cost model based on HCPM and sought further comment.
[82] The Commission’s final decisions on the various issues that it was required to resolve were addressed in the first of its determinations to be issued under Part 3, for the 20 December 2001 – 30 June 2002 period. The Commission’s draft determination was issued on 27 June 2003; the Commission then held a conference in August 2003 before issuing its final determination on 17 December 2003 (the 2001 - 2002 Determination).
[83] The iterative process adopted by the Commission in developing the methodology that it would apply in its annual determinations must be taken into account when assessing the Commission’s reasoning in relation to mobile telephony in the 2003 - 2004 Determination. The President describes the Commission’s reasoning in rejecting Vodafone’s approach as “succinct and conclusory”: at [50] above. While that is true, the Commission’s reasoning must be seen against the background that preceded it. Vodafone raised the issue of the extent to which mobile technology should be accommodated in the methodology at an early stage in the consultative process. It was discussed, for example, when Vodafone made its oral submissions at the conference concerning the draft 2001 - 2002 Determination. The views expressed by the Commission in its 2003 - 2004 Determination on mobile technology did not, then, emerge for the first time in the determination. Rather, they were discussed and developed over the course of a lengthy (and on-going) consultative process.
[84] Another consequence of the fact that the process is to be carried out annually within a relatively short time frame is, in my view, that there is unlikely to be radical change in the methodology from one year to the next. Rather, changes are likely to be incremental, at least initially. A fundamental rethinking of a significant part of the methodology may well take more time than the annual timetable allows.
An evaluative process
[85] Part 3 of the Act envisages that the Commission will identify, among other things, the “net cost” to Telecom of serving CNVCs. “Net cost” is defined is s 5 of the Act to mean “the unavoidable net incremental costs to an efficient service provider of providing the service required by the TSO instrument to [CNVCs]”. The standard of an “efficient” service provider effectively directs the Commission not to simply utilise the costs in fact incurred by Telecom in providing services to CNVCs but to utilise the costs that an efficient provider would incur. In this way, Part 3 attempts to avoid one of the deficiencies of traditional “cost plus” forms of utilities’ regulation and attempts to replicate the type of outcome that would occur if the CNVCs were supplied in a competitive market.
[86] As the Commission noted in the 2001 - 2002 Determination, the Act gives relatively little guidance on how the net cost calculation is to be carried out, so that the Commission is left “to exercise some degree of judgement in calculating the net cost of the TSO”: at [27].
[87] In considering the costs of the TSO services to an efficient service provider, the Commission had to decide whether to adopt a top-down or a bottom-up approach. The Commission described the difference between the two approaches in the 2001 - 2002 Determination as follows:
366.Networks are alternatively modelled on a top-down or bottom-up basis. A top-down model typically starts with engineering data and accounting information from a real network and makes various adjustments to the inputs with the intention of estimating the costs to an efficient network operator of providing the service to be costed. A bottom-up model, on the other hand, builds a theoretical model of a forward-looking efficient network from the ground up, and uses this to calculate the cost. Telecom’s cost model tends to take a top-down approach, although some bottom-up information is also included.
[88] The Commission adopted a bottom-up approach, which “involves identifying the individual network elements and activities necessary to provide the relevant services and then determining the costs of each of those elements and activities”: Commerce Commission TSO Position Paper 30 September 2002 at [27]; 2001 - 2002 Determination at [445]. It did so because it considered that this approach to modelling “is most likely to provide a reliable estimate of the net cost of the TSO, and is most consistent with the Act”: 2001 - 2002 Determination at [445]. Telecom objected to the bottom-up approach, on the ground that it went further in its efficiency demands than the Act required, a contention which the Commission rejected: see the discussion in the 2002 - 2003 Determination at [43] – [54].
[89] The Commission then had to consider the extent of optimisation to be incorporated into the model. A fully optimised model would be constructed on a “greenfields” basis, incorporating the most up-to-date technology, a network topology with the most efficient routing and exchanges placed at the most efficient locations (the “scorched earth” approach). In effect, it would ignore the existing network. But, as the Commission pointed out, most regulators reject such an approach as it does not recognise efficient investments made by TSPs in their networks in the past and does not encourage continued efficient investment by TSPs: see the discussion in the TSO Position Paper at [35] – [43]; 2001 - 2002 Determination at [39]. In discussing the concept of an efficient TSP the Commission said in the TSO Position Paper:
[146] I turn now to the Commission’s reason for rejecting Vodafone’s approach, summarised at [50](a) of William Young P’s judgment: that Vodafone’s approach is inconsistent with the scorched node model. In my view, the scorched node model adopted by the Commission was (at its inception) consistent with s 5 of the Act. Indeed, it was clearly an appropriate model for the Commission to adopt for the reasons given by William Young P at [42] – [48] of his judgment and by Arnold J at [91] – [92] of his judgment.
[147] There is no doubt that Vodafone’s approach would require a departure from the strict scorched node approach. Indeed, Vodafone’s very complaint was that the Commission should have used Telecom’s actual mobile network rather than a hypothetical one tied to the nodes (see at [100] of Arnold J’s judgment). There is also no doubt that Vodafone’s approach would require discounting Telecom’s fixed network and the past investment decisions made with regard to that network (at least where the mobile network could deliver in a more cost efficient manner). This is essentially a scorched earth approach with regard to at least part of the fixed network. The suggested optimisation of Telecom’s mobile network could be seen as essentially doing the same for that network.
[148] There may well come a time when the Commission should abandon the scorched node approach but that time has not so clearly arrived that it was an error of law for the Commission to refuse to reconsider its model. After all, as Arnold J points out at [114], this was the first occasion mobile technology was capable of meeting the requisite quality standards (and not for all CNVCs), and the scorched node model was developed after a lengthy consultative process and is only in its third year of operation.
[149] The Commission’s third reason, summarised by William Young P at [50](c), seems merely to restate one of the justifications for adopting a scorched node approach. This model was a legitimate choice for the Commission and it cannot be an error of law to maintain that model unless it has clearly become inappropriate to do so.
[150] Vodafone argues that the Commission has not applied the s 5 definition of net cost correctly and has not given proper weight to s 18. I agree that the Commission gave proper effect to the net cost definition for the reasons Arnold J gives at [117] – [125] of his judgment. I also agree, for the reasons given by Arnold J at [130] – [136] of his judgment, that the Commission took proper account of s 18 of the Act.
Where I differ from Arnold J
[151] I record that I do not agree with Arnold J’s tentative conclusion at [115] – [116] of his judgment that it may have been an error of law for the Commission to have adopted a scorched earth methodology at the outset. Despite what William Young P calls “mixed signals” in the Act (see at [45] – [47] of his judgment), I consider that a scorched earth approach would have been consistent with the Act even at the inception of the process. I consider, as does William Young P, that the legislature envisaged an objective test based on a notional efficient operator. This is made clear by s 5 of the Act. This would have allowed a green fields approach to have been adopted.
[152] On the other hand, s 5 does not mandate an approach that ignores past investments that were efficient at the time they were made. This is particularly the case in an industry where technology is developing at a very fast pace. I see the “mixed signals” in the Act as allowing an approach that takes account of past investment decisions and the actual costs of the provider. I do not, however, see the “mixed signals” as mandating that approach. The appropriate approach was one for the expert Commission, taking account of all relevant factors.
Conclusion
[153] For the above reasons, I do not consider there to have been an error of law in the Commission’s approach. However, a point may well come (and relatively soon) where the Commission would be obliged as a matter of law to consider whether its scorched node approach should still apply. As noted by William Young P at [48], the scorched node approach is not embedded in the legislation.
Solicitors:
Wilson Harle, Auckland for Appellant
DLA Phillips, Wellington for Respondent
Commerce Commission, Wellington
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