i4free/Slingshot Sue Telecom For $18 Million
An amended statement of claim was today filed for $18,162,342 against Telecom New Zealand in the High Court at Wellington by the free Internet provider I4free and its successor company Slingshot.
The claim which also involves the Commerce Commission originates from April 2000 when i4free, New Zealand's first free Internet provider, says it was disconnected by Telecom without warning and with no justification.
A High Court injunction was won by i4free to stop Telecom from acting to disconnect further i4free customers.
But i4free says Telecom ignored the High Court order and restricted the access that I4free customers to such a degree that it was almost impossible for them to use the free Internet service most of the time.
The claim says Telecom's actions resulted in considerable damage to i4free/Slingshot's reputation and their customer base.
By ignoring the High Court order Telecom effectively cut off customers such as the muscular dystrophy association. Many of these customers used i4free as their only communication to the outside world and in some cases Telecom's actions could have resulted in life threatening situations.
Annette Presley, Chief Executive of Slingshot, (the i4free offshoot which now offers a low-priced ISP service) said, "We have filed an amended statement of claim against Telecom for $18 Million for the damages they have caused to our business, breach of contract, and breach of the Commerce Act sections 27 and 36.
"Because of the greed of a monopolistic, predatory company, the right to free Internet was removed from New Zealanders. We are seeking redress for this.
"The shareholders of i4free and Slingshot have invested millions of dollars in growing an internet company that was squashed by Telecom, which only two days ago announced that it has substantially grown its own ISP Xtra in terms of both revenue and profit."
Annette Presley said the telecommunications environment in New Zealand had seen free Internet services falter as Telecom had driven the potential growth out of New Zealand because of its restrictive practices.
Many telecommunications and Internet companies had been eliminated, including Telegroup, Newcall, Voyager, Surf4nix, Asia Online and i4free.
In the meanwhile Xtra was able to announce record growth and profit.
"With no effective regulations and Telecom controlling the marketplace and removing freedom of choice what other outcome could there be?"
She said the High Court claim was based on the introduction of 0867 numbering which was a system introduced by Telecom so that it could avoid paying interconnect fees and charge customer for local internet calls.
This change represented a contravention of Telecom's commitment under the Kiwi Share.
"We are simply seeking a fair share of costs as with the use of an ISP, the costs incurred by Telecom are reduced. In the United States and Britain this is recognised, and interconnect revenue is paid in order to create a level playing field.
"Telecom have blatantly used their dominant position in the market and their control of the telecommunications industry to drive out competition. They have acted anti-competitively and the people who are suffering are New Zealanders"
She said 4free/Slingshot had joined with the Commerce Commission to bring this case to court.
They had also retained a highly respected firm of Forensic Accountants and financial intelligence specialists McAllum Peterson. They have worked with KPMG Legal and Slingshot to produce a cohesive report that details the extent of the damage, the ramifications and the factors that saw the growth of i4free severely limited because of Telecom's actions.
"Telecom recently stated in the New Zealand Herald that they see free Internet providers as a threat to their business".
"But while they have driven out companies like i4free and the availability of free Internet providers they have in the meantime been able to announce phenomenal growth in Internet traffic, revenue and million of dollars in increased profits, the benefits of which are largely being funnelled to overseas shareholders."
She said there was an imbalance in payment for services in New Zealand that other countries don't experience.
"Twenty-five per cent of our customers are businesses. They pay Telecom 4c a minute when they dial up for Internet with an ISP.
"The ISP takes away half the costs telecom face by doing the billing, service and carrying the calls.
"But Telecom are being paid twice through the per minute rate and in residential through their line charges.
"How does this make sense? All we seek is what the new legislation states it will achieve fair share of avoided costs, in other words - TSLRIC (An internationally accepted method of cost allocations between carriers).
"While Telecom make an obscene profit it is the small companies like us that suffer along with other businesses and individuals of New Zealand.
"Our Slingshot service has grown to around 15,000 subscribers as we offer a high performance pay ISP service that is almost half the price of Telecom's Xtra. "
Annette Presley said Slingshot was a viable business which was bringing the case to seek justice and to hopefully show a company that believed it was above the law that it couldn't control the New Zealand telecommunications marketplace and remove freedom of choice because it happened to be the biggest.
It was an understatement to say CallPlus and Slingshot were disappointed to be in their present position as their only desire was to create a free Internet company that had a large customer base which enabled it to provide a great service at the lowest possible cost to the end user.
She said the court battle could cost millions of dollars but it was important to fight for the freedom of choice in the New Zealand marketplace and to stand up against the predatory tactics that Telecom was in a position to keep on using.