FEDERAL COURT OF AUSTRALIA

 

Optus Networks Pty Limited v Telstra Corporation Limited [2001] FCA 1798

 

TELECOMMUNICATIONS – Access Agreement between Optus and Telstra – whether Telstra breached its contractual obligation to provide Optus with “Access Service” – whether Optus deprived of the benefit of the clause guaranteeing the provision of “Access Service” – whether Telstra breached its barring obligations under the Access Agreement – whether Telstra breached its preselection availability obligations under the Access Agreement – whether Telstra breached its obligation not to tariff preselectable services in an anti-competitive way – whether Telstra breaches its obligation to act in good faith in relations to Optus with respect to all matters relating to or contemplated by the Access Agreement – where Telstra requires subscribers to its HomeLine Net service not to use the override facility – where physical infrastructure necessary to support the override facility still available – where only bar to use of override facility a contractual one – where subscribers elect to accept the terms of HomeLine Net.

CONTRACT - whether breach of implied duty to cooperate – whether breach of duty to act in good faith.

TRADE PRACTICES – misleading or deceptive conduct – where marketing of Telstra’s HomeLine Net states “no override available” – where override is physically available to subscribers of HomeLine Net.

 

WORDS & PHRASES – “Access Service” “tariffing of Preselectable Services” “anti-competitive”

Trade Practices Act 1974 (Cth) s 52

Telstra Corporation Limited v Optus Communications Pty Ltd (1997) 75 FCR 171 referred to

Cubillo v Commonwealth (No 2) (2000) 103 FCR 1 applied

Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liquidation) [2001] FCA 1628 referred to

Futuris Corporation Limited v ERG Limited [2001] FCA 1126 referred to

Vasram v AMP Life Limited [2000] FCA 1916 referred to

Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 applied

Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd (1976) 25

FLR 169 referred to

Burger King Corporation v Hungry Jacks Pty Ltd [2001] NSWCA 187 referred to

OPTUS NETWORKS PTY lIMITED (acn 008 570 330) & optus mobile Pty ltd (acn 054 365 696) v TELSTRA CORPORATION LIMITED (acn 051 775 556)

N 269 of 2001

MOORE J

14 DECEMBER 2001

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 269 OF 2001

 

BETWEEN:	OPTUS NETWORKS PTY LIMITED (ACN 008 570 330) FIRST APPLICANT
AND:	OPTUS MOBILE PTY LTD (ACN 054 365 696) SECOND APPLICANT   TELSTRA CORPORATION LIMITED (ACN 051 775 556) RESPONDENT
JUDGE:	MOORE J
DATE OF ORDER:	14 DECEMBER 2001
WHERE MADE:	SYDNEY

 

THE COURT ORDERS AND DECLARES THAT:

 

1.         Telstra Corporation Ltd has breached clause 13.3.7 of Schedule 13 of the Access Agreement dated 14 August 1992 by including as a term of subscribing to the HomeLine Net service that the subscriber agree not to acquire services from other carriage service providers by dialling the access override codes of those carriage service providers while subscribing to the service.

2.         The proceedings be stood over until 9.30am on 12 February 2002 for a directions hearing concerning further hearings to determine relief (including damages) arising from the breach referred to in order 1.

3.         Save as to the matters referred to in orders 1 and 2, the application otherwise be dismissed.

4.         Liberty to apply on 3 days notice.

5.         Costs reserved.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 269 OF 2001

 

BETWEEN:	OPTUS NETWORKS PTY LIMITED (ACN 008 570 330) FIRST APPLICANT
AND:	OPTUS MOBILE PTY LIMITED (ACN 054 365 696) SECOND APPLICANT   TELSTRA CORPORATION LIMITED (ACN 051 775 556) RESPONDENT

 

JUDGE:	MOORE J
DATE:	14 DECEMBER 2001
PLACE:	SYDNEY

REASONS FOR JUDGMENT

Introduction

1                     Optus Networks Pty Ltd & Optus Mobile Pty Ltd (collectively "Optus") commenced proceedings on 20 March 2001 against Telstra Corporation Limited ("Telstra") claiming it has breached an agreement between them in various ways and engaged in conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth).  On 6 June 2001 an order was made to the effect that liability would be determined before any issue of damages was considered.  This judgment deals with liability.  The agreement ("the Access Agreement") was made on 14 August 1992 and has been varied on several occasions since.  The breaches are said to have arisen as a result of Telstra developing and marketing a telecommunications service to domestic subscribers called HomeLine Net.  The way the service is marketed is also said to involve conduct which is misleading or deceptive.  At the centre of the dispute is a term that the HomeLine Net service is available to subscribers on the basis that they not use an override facility on their phones to access telecommunications services provided by other companies including Optus.

Background

2                     The Access Agreement was made when Optus was entering the market as a supplier of telecommunications services and as a competitor of Telstra.  The statutory context in which this occurred was helpfully summarised by Mansfield J in Telstra Corporation Limited v Optus Communications Pty Ltd (1997) 75 FCR 171 at 173-174.  His Honour's summary (by reference to circumstances existing in 1997) is as follows:

“The emergence of competition in the telecommunications industry within Australia is of relatively recent origin.

The present legislative structure reflects the ongoing process of establishing a fully competitive telecommunications industry.  That point has not yet been reached.  It is desirable, for the purpose of considering the questions in issue, to have some understanding of the process as it reflects Government policy and planning.

The Australian Telecommunications Commission ("Telecom") was first established under the Telecommunications Act 1975, and became the Australian Telecommunications Corporation under the Australian Telecommunications Corporations Act 1989.  OTC had first been established as the Overseas Telecommunications Commission under the Overseas Telecommunications Act 1946, and was converted into a public company, Government owned, by the OTC (Conversion into Public Company) Act 1988.  Aussat Pty Ltd ("AUSSAT") was incorporated as a proprietary company in 1981. The Satellite Communications Act 1984 (later renamed the AUSSAT Act 1984) restricted AUSSAT's eligible shareholders to Telecom and to the Commonwealth, and limited the scope of its activities in a general way to those complementary to Telecom and OTC.

Until the Telecommunications Act 1989, the telecommunications industry within Australia operated under that regime, comprising the publicly owned triumvirate of Telecom, which had control of and responsibility for all aspects of domestic telecommunications services other than satellite services, OTC which had control of and supplied international telecommunications services, and AUSSAT which operated domestic satellite communications.  Telecom both owned and controlled the domestic fixed network and provided access to the network and supplied a full range of telecommunications services over that network.

The Telecommunications Act 1989 commenced the process of freeing up the market.  It created the Australian Telecommunications Authority (AUSTEL) and gave it overall responsibility for:

"economic and technical regulation of the Australian telecommunications industry, including, in particular, implementation of the Commonwealth Government's industry policies relating to telecommunications" (s18(a))

and general functions then of protecting carrier reservations, protecting competitors from unfair practices of carriers, protecting consumers from unfair practices, and promoting the efficiency of carriers, as well as technical regulation.  It therefore became the regulator of the operational functions of the telecommunications industry, independent of Telecom.  That Act also included provisions to facilitate competition but only outside the basic telecommunications network facilities and services, and to refocus the three primary providers towards a greater commercial discipline.

In November 1990, the Government announced a large number of key decisions directed to the further development of a competitive telecommunications industry in Australia, accompanied by the detailed statement entitled "Microeconomic Reform:  Progress Telecommunications".  The Bureau of Transport and Communications Economics publication "Telecommunications in Australia, Report 87" AGPS, January 1995 stated:

"The main goal of the recent Australian reforms is the creation of a globally competitive telecommunications industry.  The strategy to achieve this goal is based on the introduction of genuine and sustainable network competition (initially through a network duopoly) and the creation of a world class telecommunications industry"

at xiv, and seriatim.  That accords with all other evidence before me on that score.  Those decisions included:

the merger of Telecom and OTC into a single carrier providing domestic and international telecommunications services;

the establishment of a fixed network duopoly by the licensing of a private enterprise competitor;

the sale of AUSSAT to that private enterprise competitor;

the licensing of three mobile carriers;

the liberalisation of the resale of network capacity;

open competition in public access cordless telecommunications services; and

various competitive and consumer safeguards to promote the widespread development of competition and to protect the long term interests of consumers.

The further element of the Government's strategy was to produce or facilitate arrangements to foster industry development.

It also announced the intention to open up the telecommunications industry to unrestricted competition from 30 June 1997.  The duopoly structure was only intended as a means of or as a process towards introducing greater network competition, rather than the end in itself.

It was in consequence of those decisions that the 1991 Act and related legislation was enacted.  Further, in accordance with its plan for two licensed general carriers under the 1991 Act, AUSSAT was sold to Optus Communications.  Optus Communications is the owner of all the issued shares in Optus Networks.

The 1991 Act, for present purposes, came into effect commencing on 1 July 1991. It provides the general regulatory framework for the provision of telecommunications facilities and services in Australia.  At the same time the Australian and Overseas Telecommunications Corporation Act 1991 ("the AOTC Act") was enacted, having as its purpose that Australian and Overseas Telecommunications Corporation Limited ("AOTC") should take over the undertakings and assets of Telecom and OTC.  On 13 April 1993 AOTC changed its name to Telstra Corporation Ltd.  That legislation was accompanied by other Acts as part of the package of legislation and by the repeal of the Telecommunications Act 1989, the Australian Telecommunications Act 1989, the Overseas Telecommunications Act 1946, and by a suite of consequential amendments to other legislation:  Telecommunications (Transitional Provisions and Consequential Amendments) Act 1991.

The 1991 Act provided in detail for AUSTEL's continued existence:  s34, and its enhanced powers and functions as the telecommunications authority, for the licensing of telecommunications carriers and the identification of activities exclusively available to licensed telecommunications carriers, the regulation of the relationship between the carriers, the overall regulation of telecommunications services and technical regulation, including a specific mandate to promote competition.  It does not itself provide for the duopoly.  Part 5 "Licensing, And General Obligations, Of Carriers" provides for the grant of general telecommunications licenses and public mobile licenses without specifying a numerical limit for either general carriers or mobile carriers, defined as the holders of general telecommunications licenses and public mobile licenses respectively:  s5.  However, the planned duopoly was confirmed during the minister's Second Reading Speech when he said that:

            "... the creation of one strong competitor is the best way of achieving genuine and sustainable network competition quickly ... (with the) aim to ensure that by 1997 there is a significant, recognised network competitor to Telecom - OTC".

                (Hansard, 7 May 1991, p3096)

Accordingly, to date and at least to 30 June 1997 there are only two general carriers under the 1991 Act.  Part 6 of the Act preserves to general telecommunications carriers the exclusive rights to certain telecommunications facilities, satellite services and public mobile telecommunications services.  Part 8 of the 1991 Act provides for the nature of the relationship between the general carriers, and Part 9 regulates the supply by carriers of basic carriage services (as defined in s174), including regulation of the terms and conditions of supply of telecommunications services by those carriers and the pricing processes and controls.”

3                     While his Honour relied on the evidence before him in making some of these comments, the policy and statutory context in which the Access Agreement was made is not controversial and the above summary reflects evidence given by Mr Peter Waters, a solicitor for Optus in these proceedings.  Waters' evidence was also directed to the specific policy settings out of which the Access Agreement emerged.  The following is Waters' evidence about that matter.

4                     On 8 November 1990 the Prime Minister made a Ministerial Statement on Transport and Telecommunications Reform.  The Ministerial Statement proposed that reform would be implemented in part by not only the establishment of the transitional fixed network duopoly based on a merged Telecom/OTC and a private sector competitor based on a privatised AUSSAT but also pro-competitive safeguards.  These safeguards included ensuring that the networks of the two carriers would be interconnected and that members of the public would have equal access to each carrier.

5                     In November 1990, the Department of Transport and Communications published a booklet called “Micro-economic Reform:  Progress, Telecommunications”, which set out the decisions made by the Government to introduce full network competition.  The document recorded Decision 44 of the Government, which was:

“Telecom and OTC will continue to trade as separate entities until AUSTEL has certified to the Minister for Transport and Communications that interconnection and equal access arrangements are fully in place in all capital cities and that a timetable for the early installation of such arrangements for provincial cities has been agreed to by Telecom/OTC.”

6                     On 15 March 1991 AUSTEL released a report on customer access arrangements that canvassed issues relating to preselection, dial code access and the implementation of customer access in a competitive environment.

7                     On 14 June 1991 AUSTEL released a further report which outlined a technical and operational framework for interconnection and equal access.  A later AUSTEL Interconnection and Equal Access Certification Report stated that on 8 July 1991 the Minister responded to AUSTEL’s 15 March 1991 report on customer access arrangements in the following terms:

“It is clear that, of the available options, only preselection with over-ride dial codes achieves equal access in the terms of the Government’s decisions.  I will be directing Telecom to make arrangements to ensure the earliest possible introduction of equal carrier preselection with over-ride codes and I would like AUSTEL to ensure that the arrangements are implemented efficiently and quickly.”

8                     What preselection means and what an override dial code is will be explained shortly. On 1 July 1991 the Telecommunications Act 1991 came into effect.

9                     On 19 November 1991 the Minister for Transport and Communications announced that Optus had been selected as the second carrier.  It entered a Network Development Deed with the Commonwealth of Australia on 6 December 1991, which imposed obligations on Optus in relation to the construction of its network including an obligation in cl 4.2(f):

“by year end 1997 the Optus network shall have adequate capacity to provide originating access to DLD (Domestic Long Distance Services) and ILD (International Long Distance Services) to 100% of the Australian population.”

10                  On 14 January 1992 AUSTEL certified that interconnection and equal access arrangements were in place between Optus and Telstra, or were provided for adequately.  The Interconnection and Equal Access Certification Report issued by AUSTEL described the essential elements of interconnection and equal access as interim dial code access, preselection with over-ride codes and an access agreement.

11                  The general carrier licences issued to Optus and Telstra were subject to conditions regarding interconnection and preselection.  Licence condition 9.1 provided as follows:

“A licensee is to ensure that, as soon as practicable, and in any case no later than 30 June 1997, the licensee’s network facilities:

(a)       are capable of being interconnected with the facilities of a nominated carrier; and

(b)       permit a customer to preselect a carrier as the customer’s preferred           carrier and to change that selection from time to time.”

12                  Licence Condition 9.2 required each carrier to ensure that:

“(a)     interim dial code access using the single prefix “1” is available to nominated carriers on or before 1 January 1992;

(b)       carrier preselection with over-ride dial codes is introduced as soon as possible;

(c)        carrier preselection with over-ride dial codes is available in 90% of exchange lines in each capital city and 30% of the exchange lines of provincial centres, other than urban centres and rural areas, no later than 30 June 1993; and

(d)       carrier preselection with over-ride dial codes is available to all Australian customers no later than 30 June 1997”

13                  Optus commenced offering long distance telecommunications services in Australia in November 1992.  At that time it had not established a telecommunications network to which customers were able to be directly connected.  Rather, Optus had established a trunk network comprising telecommunication links between the major metropolitan areas in Australia and links between Australia and overseas destinations.  At the time all customers for public switched telecommunications services remained physically connected to the existing Telstra local telephone network.

14                  As Optus did not have a direct connection to customer homes, it required access to Telstra’s local network in order to provide telecommunications services to its customers.  Similarly, without that access, customers would not have been able to originate a call on Telstra’s network and direct that another segment of the call (for example, the long distance part of the call) be carried on the Optus network.  To enable a customer to choose to acquire services from Optus, its network had to be interconnected to Telstra’s, Optus and Telstra had to provide certain services (called originating and terminating access services) to each other and a customer directly connected to Telstra’s network had to have some means of telling Telstra that it wanted the call services to be provided by Optus (and conversely if Optus established direct connection links).

15                  As mentioned earlier, Optus entered the Access Agreement with Telstra on 14 August 1992.  For the purpose of this narrative its effect can be described as follows. The Access Agreement contained the terms and conditions on which each carrier agreed to interconnect its network to the network facilities of the other carrier, supply requested telecommunications services to the other carrier and make available certain services, facilities and information to the other carrier.

16                  A preselection regime could not be implemented until after interconnection of the two networks had occurred.  The Access Agreement, as it originally stood on 14 August 1992 did not provide, in detail, for a preselection regime.  Part of the emerging scheme were arrangements that enabled customers to tell Telstra they wanted call services to be provided by Optus with the same ease with which they selected Telstra.  This was referred to as “equal access”.  In practice, “equal access” was implemented by means of a “preselection regime”.  The preselection regime ultimately implemented by Optus and Telstra allowed customers to choose which carrier would provide them with call services either on a default basis (referred to as a “default preselection choice”), or on a call by call basis using a code special to each carrier (referred to as “override choice”).

17                  The preselection regime ensured that the network to which a customer was directly connected did not dictate which carrier was, for example, the customer’s carrier for long distance services.  The preselection regime amounted to “equal access” because once implemented, there was no difference in the dialling patterns customers must use to access the carrier they had chosen to provide them (on a default basis) with preselection call services.  During 1992, Optus negotiated with Telstra regarding provision of equal access to customers by way of a preselection regime.  Until that regime was finalised, Telstra was required to, and did, implement an interim mechanism by which customers could select Optus as their preferred carrier.  How it operated technically is discussed shortly (see [38] below and following).

18                  On 11 August 1992, AUSTEL issued a direction to Telstra, under s 46 of the Telecommunications Act 1991(Cth).  In that letter AUSTEL directed Telstra to negotiate pre-selection issues with Optus on the basis that pre-selection was to be implemented by a balloting process.  Optus did not receive a similar direction.

19                  The underlying purpose of the ballot was to enable all customers in Australia to indicate which of Optus or Telstra the customers wanted to obtain call services from in relation to specified call services (called preselectable services).  Once a customer had specified a particular carrier, all their preselectable calls would automatically be provided by that carrier.  However, customers were to retain the ability to override their default preselection, on a call by call basis, so that even if they selected Telstra as their default carrier, they could override to Optus whenever they wished.  Preselection with the ability to override a customer’s preselected carrier on a call-by-call basis promoted the objective of “equal access” because it meant that customers could choose their preferred carrier on both a long term (preselection) and short term (override code) basis and customers would at all times have access to all carriers and the particular prices or services being offered by all carriers.

20                  A Heads of Agreement (“HOA”) on the framework and key principles of the preselection regime was signed by Optus and Telstra on 12 November 1992.  For the purposes of this narrative the effect of the HOA can be described as follows. The HOA contains the key principles for the introduction of the proposed preselection regime in Australia and states that such principles were to be formulated having regard to, amongst other things:

(a)        the objects and provisions of the Telecommunications Act 1991 (Cth);

(b)        customers making a positive choice of their pre-selected carrier;

(c)        the importance of customer awareness and knowledge of the competitive telecommunications environment by the time a ballot is held;

(d)        the desirability of providing Optus with an opportunity to establish its name in the market, familiarise customers with its services and gain knowledge of customers by the time a ballot is held; and

(e)        the desirability of achieving customer response to a ballot process as early as possible in that process, ie at the first ballot.

Clause 7 of the HOA specified that preselection implementation would follow the rollout of Optus network and the ballot process would commence within specified timeframes after that rollout.  On 27 April 1993 the Minister of Communications wrote to AUSTEL.  The Minister’s letter is set out in 3.3.A.1 of sch 13 to the Access Agreement which is referred to shortly.

21                  Before considering the terms of the Access Agreement it is desirable to set out some of the more detailed evidence concerning the operation of the networks of Telstra and Optus.

The networks in operation

 

(i)  Generally

 

22                  Evidence was given by Mr Robert John Douglas, who is the Product Deployment Manager for Interconnect at Telstra, about how the networks operate in a technical sense.  While aspects of this evidence had been touched on already it is convenient to repeat the substance of his evidence to place in context the provisions of the Access Agreement which will be discussed shortly.  His evidence was to the following effect.

23                  Telephone calls, including voice, facsimile and data calls, are carried over telecommunications networks.  All telecommunications networks have the same basic architecture.  There is a terminal device (such as a telephone handset) entering the core of the network (which carries the call or transaction from one access point to another) via the access network (cable or radio).  A switching or routing function in the core transfers/transits the call through the core making decisions about which route to take along the way.  A transmission interconnecting function transports the call between switches/nodes, before the call is connected to the terminal device (handset) where the call is received.  Switches enable the transmission of telecommunications traffic by establishing a temporary connection between the calling party and the called party.

24                  Telstra has a number of switched networks, including the PSTN (the switched telephone network to which most customers in Australia are connected and over which most voice and data calls are carried), as well as the mobile networks (GSM and CDMA), Telstra’s Intelligent Network and internet, data and older ISDN networks.  The Intelligent Network provides databases or look-up tables for the routing of calls where a geographic number is not dialled by the customer (for example, a 1800 call).  Telstra’s PSTN network is its largest telecommunications network, having in excess of ten million fixed line services connected to it.  The physical elements of Telstra’s PSTN comprise first the customer access network (“CAN”), and secondly the Inter-Exchange Network (“IEN”).

25                  The PSTN operates by allowing a call to travel from a customer’s premises through the CAN (a network of conduits and pipes in the ground which uses cables, mostly consisting of twisted copper pairs, for transmission) to the customer side of Telstra’s Remote Access Units (“RAUs”) and enables the connection of telephones and other customer premises equipment to the IEN.  RAUs are the subscriber stage concentrating units, generally within a few kilometres of a customer, associated with a Local Access Switch (“LAS”).  Each LAS has many RAUs.  The point at which Telstra’s network terminates at customers’ premises is known as the Network Boundary Point.

26                  The IEN consists of Telstra’s LASs, Transit Network Switches (“TNSs”), International Gateway Exchanges (“IGEs”), Interconnect Gateway Switches (“IGSs”), and associated transmission links between switches.  Switches are also referred to as exchanges.  Telstra IGSs can be stand-alone exchanges dedicated to this function, or the IGS function can be part of a LAS or TNS.  The choice of where the interconnect functionality is provided is based on the individual circumstances which exist at the time another carrier seeks interconnection.  The transmission links generally are optic fibre cables, with some wireless links.

27                  Telephone switches have three main elements.  The first is line terminating equipment (“LTE”) to terminate each line (circuit).  A line may be to another switch via the IEN or, in the case of a LAS, to a customer via the CAN.  The second element is control equipment used for routing, charging, signalling and customer features.  The third element is switch blocks to connect the incoming line to the selected outgoing line.  “Equipment” in this context may mean software, hardware, data or a combination of them.

28                  LASs are the initial delivery point for a customer’s fixed line telephone service, and manage the delivery requirements of each specific communication.  Assuming that a call is not to a customer connected to the same LAS, the IEN transports a call to the relevant terminating LAS for delivery, that being the LAS to which the called party is connected.  The transmission is controlled by a signalling system.

 

(ii)  Making a telephone call on the PSTN

29                  The simplest way for a telephone call to take place is between two customers connected to the same LAS.  When one party lifts the handset it signals the LAS that the party wishes to make a call.  The LAS response is to send a dial tone, enabling the party to dial the number it seeks to connect to.  The LTE passes this number to the control equipment for analysis and a check to see that the line is free.  If it is, it tells the switch block to connect the two lines and sends a ring tone to both parties.  The control equipment also creates a record of the call for billing purposes. 

30                  The next simplest type of call is to a customer connected to another LAS in Australia.  When a party picks up the handset it again tells the LAS that the customer wishes to make a phone call.  On receiving the dial tone that the LAS sends back, the party dials the number required.  The LTE passes the number sought to the control equipment, which then signals to the LAS to which the customer receiving the call is connected (either directly or through TNSs).  The control equipment of the receiving party switch checks whether the line is free.  If it is, the control equipment tells the switch blocks in all of the switches to connect the two lines and sends a ring tone to both parties.  The control equipment in the switch nearest to the calling party creates the call record of the call.  The routing intelligence is in the routing tables in the control equipment, which typically specify that a call should be routed direct to the destination switch if possible, or else to another switch which acts as a transit switch.  If the transit switch receives the call it consults its routing tables.

31                  For an international call from the PSTN, a customer lifts the handset and receives a dial tone from the LAS.  The customer dials the overseas number required which is sent to the customer’s LAS and then connected through one or more TNSs to an IGE, and then to the overseas country.

32                  For a call by a customer connected to Telstra’s PSTN to a Telstra mobile service (a “fixed to mobile call”), the customer dials the mobile telephone number of the party sought.  The call is sent to the customer’s LAS, which then connects the call to one or more TNSs as necessary.  The last TNS connects the call to a mobile switch.  From there, the call is transmitted to a mobile tower and then delivered to the receiving party’s mobile handset by wireless transmission from a base station.  The examples provided in this and the preceding three paragraphs do not address complications that may arise by virtue of interconnection with other carriers and preselection.

33                  When the software and data in LASs, TNSs, IGEs and IGSs is changed, this is referred to as “network conditioning”.  This is required when, for example, new services and access codes are introduced, switches are changed, new transmission systems are introduced, or routing is changed.

 

(iii)  Services supplied using Telstra’s PSTN

34                  Telstra’s PSTN enables the supply of (among other things) a basic telephone service (which comprises connection to Telstra’s PSTN, a telephone number and access to certain call types) and various call types, such as international direct dial calls, national long distance calls, local calls, fixed to mobile calls, facsimile calls, infocalls, operator assisted calls, Telstra Call Connect, Directory Assistance and numerous others.

35                  From approximately 1991 Telstra started rolling out interconnection with the Optus network.  This required the establishment of points of interconnection (“POI”s) and the appropriate conditioning of Telstra’s switches on a progressive basis as Optus rolled out its network.  A POI is that point in a Telstra IGS or in an equivalent part of Optus’ network where the respective networks are demarcated and communications pass from one network to the other.

36                  Interconnection enables calls to be passed between networks (which does not necessarily involve any preselection, for example a call from a customer directly connected to the Telstra network to a customer directly connected to the Optus network), and also is necessary for customers to be able to choose which telecommunications carrier to use for “preselectable services”.  Initially, preselectable services were national and international direct dial long distance calls, certain operator assisted calls, certain call charge enquiry calls and international ring back call charge enquiries.  Preselectable services now also include fixed to mobile calls.

37                  For a long distance call made by a customer directly connected to Telstra’s network to be sent to and carried by Optus, it had to be marked in some way so that the Telstra network recognised that it was intended to be carried by the Optus network.  The initial solution (referred to as the interim mechanism in [17] above) was to enable the customer to dial a “1” before the long distance number dialled if the customer wished to use Optus.  Telstra’s LASs were conditioned to recognise the “1” followed by the “0” and insert an appropriate prefix in front of the number dialled.  The prefix would then be recognised by Telstra’s network as one which was to be routed to Optus, and the call would be routed to Telstra’s IGS for handover to Optus at the POI.  The call would then be carried by the Optus network, although it might be returned to the Telstra network by Optus for final delivery to the receiving party, assuming the receiving party was directly connected to the Telstra network.

38                  The initial solution of having customers dial “1” for a call to be routed to the Optus network operated whilst the preselection ballots referred to earlier (at [19]) were conducted in Australia.  The results of the ballots (resulting in the nomination of a preferred carrier for preselectable services) were implemented at the LASs of Telstra and Optus.

39                  From about 1995 this method of selection was no longer necessary as preselection ballots had been conducted and LASs conditioned with each customer’s choice of their preferred (or preselected) carrier.  For customers who made no choice the default choice of preselected carrier was the carrier to whose network the customer was directly connected.  From about this time, and apart from a limited number of lines which were not technically capable of supporting preselection, a customer directly connected to Telstra’s network has been able to use Optus for preselectable services by one of two means.  The first is “preselecting” Optus.  If a customer preselects Optus for such services, the customer’s LAS is conditioned by Telstra to store an indication that each preselectable call is to be routed to Telstra’s IGS for handover to Optus at the POI unless the customer uses an override code for the call.  The routing of the call to Optus is automatic, and it is not necessary for the customer to dial “1”.  The second was being preselected to Telstra (or, since 1997, by being preselected to a carrier other than Optus, including Telstra), and dialling the Optus override code 1456 at the beginning of any preselectable call.  A customer’s preselection choice is not affected, but the customer’s LAS is conditioned by Telstra to recognise the Optus override code and route the call to Telstra’s IGS for handover to the Optus POI.

40                  A preselectable call made by a customer directly connected to Telstra’s PSTN who has preselected Optus or who is preselected to a carrier other than Optus but dials the Optus override code passes from the customer’s terminal to the Telstra LAS.  The Telstra LAS is programmed so as to recognise the call as one to be routed to Optus at the POI in Telstra’s IGS.  The switch routes the call directly, or via TNSs, to Telstra’s IGS, from where the call is routed across a POI with the Optus network.  Optus bills the customer for the call, and pays Telstra for the use of Telstra’s network. 

41                  I should add that this facility of being able to dial an override code is at the centre of the present dispute between Optus and Telstra.  It is a facility that, relevantly, a customer preselected to Telstra can use to make calls over the Optus network.  Optus might advertise a special rate for trunk calls for a particular destination for a limited period.  Customers preselected to Telstra could avail themeselves of that offer by dialling the override code to effectively enter the Optus network to make a trunk call the number for which would be dialled after the override code was entered.

42                  The carriage by Telstra of a preselectable call from a customer directly connected to Telstra’s PSTN to a POI with Optus’ network is known as “Domestic PSTN Originating Access”.  A customer directly connected to Telstra’s PSTN, having preselected Optus or dialled the Optus override code in respect of a preselectable call, may call another party in Australia who is not a directly connected Optus customer.  If the other party is directly connected to Telstra’s PSTN, Optus needs to use the Telstra network not only to originate the call, but also to terminate the call.  In order for the call to be delivered, the call passes from the Optus network back to Telstra through a POI in Telstra’s IGS.  The call then travels, either directly or via Telstra TNSs, to the LAS of the receiving party and then to the receiving party’s customer terminal.  Optus bills the customer for the call and pays Telstra for the use of Telstra’s network in originating and terminating the call.  The carriage by Telstra of a preselectable call from a POI with Optus’ network to a receiving party who is directly connected to Telstra’s PSTN is known as “Domestic PSTN Terminating Access”. 

43                  The procedures outlined in the above paragraphs also operate in reverse.  In other words, a customer who is directly connected to Optus can use Telstra for preselectable calls by preselecting Telstra or by using the Telstra override code 1411.  In these circumstances, Optus provides originating access service to Telstra.  If the call is to be terminated by Optus on its network (because the receiving party is directly connected to the Optus network), Optus also provides terminating access services to Telstra.

44                  Telstra and Optus are not the only carriers able to be preselected for calls and which have override codes.  Although customers could preselect only Telstra and Optus as fixed network carriers during the period from 1991 to 1997, after the enactment of the Telecommunications Act 1997 (Cth) other carriers were allowed to be licensed to provide telecommunications services, including preselection, over fixed networks.  There are currently a number of such carriers.  For example, AAPT is a preselectable carrier and has the override code 1414.  Telstra conditions its network to enable preselectable calls made by customers who are connected to Telstra’s PSTN but who are preselected to these other carriers or who dial the override codes of a carrier other than their preselected carrier to be routed to and carried by the networks of these other carriers.

 

The contents of the HomeLine Net Service

45                  The following is an edited version of a description of the HomeLine Net service given by Mr Andrew Peter James Walther, who was, until 12 February 2001, the Principal Product Manager of the retail business of Telstra.  His description was:

“Telstra HomeLine Net is an option designed for customers who have internet access.  Customers are required to subscribe for Telstra HomeLine Net by ordering it on-line, and receive on-line bills.  After an initial period, customers who also elect to receive the standard paper bill incur an extra charge of $3.30 per bill.  This is in contrast to the other Telstra HomeLine™ Options, which involve a standard paper billing service, and generally involve customers ordering through the mail or by telephone.  Customers who subscribe for Telstra HomeLine Net also:

(i)        preselect Telstra for National Long Distance calls, International calls and calls to mobile services from the service;

(ii)       agree not to acquire services from other carriage service providers by dialling the access override code of those carriage service providers while subscribing to Telstra HomeLine Net;

(iii)      pay a lower monthly access charges (sic) (the monthly fixed telephone line access charge is $14.50);

(iv)      do not receive the lower rates for Neighbourhood Calls available under Telstra HomeLine Complete and Telstra HomeLine Part, and are charged 19c for local calls;

(v)       do not receive capped rates for STD or fixed to mobile calls;

(vi)      pay $3.30 per feature per month extra if they elect to receive the enhanced calling features specified in subparagraph (a) above; and

(vii)           are required to pay their Telstra HomeLine Net bills electronically (for example, by B-pay, or by phone).”

46                  The feature referred to in (ii) above is the central element of the controversy in these proceedings.  It is necessary to say something about how a customer comes to agree to this term.  As just mentioned, a customer subscribes to the service on the Internet.  The customer does so by accessing the Telstra on-line product catalogue and responding to a series of commands and requests in a particular way.  In doing so a customer is informed that:

“HomeLine Net service customers must be preselected to Telstra for Long Distance Calls and customers must make all STD, Calls to mobiles and International Direct calls through Telstra.”

…

“It is a term of this service that you agree to use Telstra for your fixed line calls and do not override to other carriers.”

…

“HomeLine Net Service is provided in accordance with the terms and conditions of Telstra's Standard Form of Agreement … available on the Internet at www.telstra.com.au/sfoa”

 

47                  The relevant section of Telstra's Standard Form of Agreement is the Public Switched Telephone Service section.  The term which may reflect the customer's agreement not to use the access override code to acquire services from another carrier emerges in a curious way.  Clause 5 in that section deals with annual charges for the "Basic Telephone Service" which includes the HomeLine Net service.  Clause 5 provides, relevantly, that:

“5.1     The annual charges for:

            (a)        …

            …

            (e)        the following types of Non-Business Services:

                        …

·        a HomeLine Net service, which is a Basic Telephone Service available to Non-Business Customers who preselect Telstra for National Long Distance calls, International calls and calls to cellular mobile services from the PSTS and who:

(i)               apply electronically for the HomeLine Net service over the Internet in accordance with the procedures notified by Telstra from time to time;

(ii)              must agree not to acquire services from other carriage service providers by dialling the access override code of those carriage service providers while subscribing to the HomeLine Net service; and

(iii)             agree to receive the HomeLine Net billing service as described in clause 11.12 of this Section instead of Telstra's standard paper billing service;

…

                                           are set out at Table 5.1.”  (Emphasis added)

 

Table 5.1 is a table setting out annual and monthly charges.

48                  One subsidiary issue in these proceedings concerns the consequences of a customer who subscribes to the HomeLine Net service using the access override code and accessing the services of another carrier.  Clause 10 of the General Terms and Conditions provides that Telstra can suspend, limit or cancel a service if the customer breaches the Standard Form of Agreement (including any of the General Terms and Conditions).  Clause 10 says, in terms:

“10.1    The Customer may cancel a Service by notifying Telstra.  Notice must be in writing unless the Service is residential.

…..

10.2Telstra may suspend, limit or cancel a Service if:

·        the Customer notifies Telstra in accordance with clause 10.1;

·        …

·        The Customer breaches the Standard Form of Agreement (including any of these General Terms and Conditions).”

49                  Another subsidiary issue concerns the means by which, both practically and legally, a customer can cancel a subscription to the HomeLine Net service.  In the Public Switched Telephone Service section of the Standard Form of Agreement, 8.bb.6 provides that a customer can cancel a HomeLine "pricing package" at any time by notice to Telstra.

50                  The restraint on a customer, who subscribed to the HomeLine Net service, using the access override code is referred to in marketing material distributed by Telstra.  In several versions of an advertising brochure promoting the service (and other services) the following is listed as one of HomeLine Net’s features:

“8.       Available to most residential customers preselected to Telstra for long distance.  Customers are not eligible for capped STD, Calls to MobileNet, the Telstra Neighbourhood Call and Telstra 25 option discounts.  No override available.”  (Emphasis added)

I turn now to consider the Access Agreement.

The terms of the Access Agreement

51                  A convenient starting point in considering the terms of the Access Agreement is cl 1. That clause contains a number of definitions which give content to several of the provisions that Optus claims Telstra has breached.  The first definition is that of "Carrier" which provides:

 

 “‘Carrier’ means

 

(a)       in relation to public mobile telephone services

            (i)         Telstra, or

            (ii)        Optus Mobile,

and, a reference to ‘Carriers’ includes both of them, and

(b)       in relation to all other domestic or international telephone services

            (i)         Telstra, or

            (ii)        Optus Networks,

and, a reference to ‘Carriers’ incudes both of them.”

52                  The Access Agreement speaks of "Access Carrier" and "Interconnecting Carrier" which are defined as follows:

 

“‘Access Carrier’ means the Carrier which provides or is to provide a Service to the Interconnecting Carrier.”

 

“‘Interconnecting Carrier’ means the Carrier to which a Service is or is to be provided.”

 

53                  These definitions speak of "Service" which, in the plural, is defined as:

“‘Services’ means all goods, services and information provided and rights or interests granted by one Carrier to another Carrier under this agreement and includes but is not limited to Interconnection Service, Interconnect Support, Access Service, Operations and Maintenance Support, Transmission Capacity, Local Loop Service, Raw Data for Directories Purposes and Supplementary Access Condition Services.”

54                  The contractual obligation of an Access Carrier to provide access is addressed by cl 4 which provides:

“4.       ACCESS SERVICE

4.1       Subject to clause 2.8 and Interconnection Service being provided in accordance with clause 3 and the Interconnecting Carrier’s compliance with the relevant Service Ordering Procedures, the Access Carrier will provide the requested Access Service in accordance with the relevant Provisioning Procedures.

4.2       Each Carrier must ensure that the carriage of Designated Communications by it conforms to the applicable QOS Standards for the carriage in respect of which the Carrier has control.

4.3       Subject to clause 12, the schedules and any practices and procedures agreed by the ICRG, nothing in this agreement may be construed to preclude the Access Carrier from using, modifying or substituting such of its Facilities for other of its Facilities as reasonably required to provide a Service provided that the Access Carrier complies with the applicable QOS Standards and Technical Specifications for Interconnection.

4.4       Promptly after the Commencement Date, the Carriers will commence negotiations concerning the terms and conditions on which Preselection will be made available, and the Carriers will use their reasonable endeavours to conclude those negotiations as soon as possible after AUSTEL has determined the requirements regarding Preselection.”

55                  Central to the operation of cl 4 is the notion of "Access Service" which is defined as follows:

“‘Access Service’ means a service for the carriage of Communications between:

 

(a)       a POI and a called number/party; or

(b)       a calling party and a POI; or

(c)        two POIs.”

As mentioned earlier, a "POI" is, for present purposes, a point of interconnection between the networks of Telstra and Optus.  The operation of cl 4 also depends on the notion of "Designated Communications" (defined as “a Communication in connection with which Access Service is provided”) which is given content in sch 1 of the agreement in the following way:

“1.2     Designated Communications

1.2.1    Domestic PSTN Originating Access is provided for:

(a)               all Communications prefixed by a

            Carrier Selection Code; and

(b)                 all Communications Preselected to the Interconnecting Carrier.”

What this means depends on two definitions.  The first is the definition of Domestic PSTN Originating Access which provides:

“‘Domestic PSTN Originating Access’ means an Access Service for the carriage of telephone calls (ie voice, data over the voiceband) from the calling number (not being a mobile number) to a Domestic PSTN POI.”

The other definition is the definition of "Communication" which provides:

“‘Communication’ has the meaning given to it in the Telecommunications Act and, where the context permits, includes an attempt to establish a communication of the general type defined in the Act (‘Communication Attempt’).”

 

The definition of "communication" in the Telecommunications Act 1991 (Cth) was:

"communication" includes any communication:

(a)     whether between persons and persons, things and things or persons and things; and

(b)     whether:

(i)                 in the form of:

(A)  speech, music or other sounds; or

(B)   data; or

(C)  text; or

(D)  visual images, whether or not animated; or

(E)  signals; or

(ii)               in any other form or in any combination of forms.”

56                  Schedule 1 of the Access Agreement contains general provisions concerning Access Services.  The schedule contains one of the provisions Optus says Telstra has breached.  It is cl 1.5, a provision concerning the disconnection of customers and the barring of services.  It is:

 “1.5    Disconnection and Barring Procedures

1.5.1    During the interim access phase when ‘10’ is used by Telstra’s directly connected customers to gain access to Optus’ Telecommunications Services, Telstra may disconnect the terminal apparatus of any such customer from the relevant Telstra Local Exchange and will, where practicable and appropriate, give reasonable prior notice to Optus.

1.5.2    When Preselection arrangements are established, the Carriers will to the extent technically practical arrange for disconnection to be “Carrier Service Specific” such that disconnections of the Telecommunications Services provided by the Access Carrier to a customer must not inhibit the customer using the Interconnecting Carrier’s Telecommunications Services unless the Carriers have agreed otherwise.

1.5.3    Unless and until the Carriers agree otherwise, a customer request for the barring of switched direct dialled trunk calls will be implemented by the Access Carrier so as to bar access to national and/or international switched direct dialled trunk calls to be routed over the Network of either Carrier.

1.5.4    A customer may request the barring of national and/or international switched direct dialled trunk calls by contacting either Carrier.

            If the Access Carrier is contacted, the Access Carrier will implement the barring.  The Interconnecting Carrier may from time to time request notification of all such barring.

            If the Interconnecting Carrier is contacted, the Interconnecting Carrier will notify the Access Carrier of the customer’s request.  The Access Carrier may contact the customer before implementing the barring for the purpose of confirming the request.  The Carriers will negotiate agreed scripts to be used for this customer contact process.

1.5.5    Except where the customer has requested service specific barring, the Access Carrier must not implement service specific barring (such as barring of access for national or international switched direct dialled trunk calls) if it also blocks access to the Interconnecting Carrier’s Network, without first obtaining the consent of the Interconnecting Carrier.”

57                  Reference has already been made to sch 13.  That schedule concerns procedures for the implementation of preselection arrangements and was inserted into the Access Agreement by a variation agreement dated 16 July 1993.  The first clause identifies the scope and objectives of the schedule and relevantly provides:

“13.1  SCOPE

13.1.1This Schedule provides for procedures for:

       (a)                 implementation of Preselection;

       (b)                 the transition from the interim ‘10’ Carrier Selection Code arrangements; and

       (c)     continuing arrangements relating to Preselection after initial implementation.

13.1.2In accordance with the procedures set out in this Schedule, each directly connected customer of each Carrier will have an equal opportunity to designate, on a non-discriminatory basis, which of the Carriers will be the preferred provider of certain Telecommunications Services to that customer over each of his or her customer access lines for which Preselection is available, irrespective of which Carrier provided those Telecommunications Services to that customer over that customer access line prior to the implementation of Preselection.

13.1.3The Carriers have agreed that the key objectives of the implementation of Preselection in Australia are as follows:

                   (a)             the promotion of and consistency with the objects and provisions of the Telecommunications Act 1991;

                   (b)             the importance of ensuring customers make a positive designation of their Preferred Carrier;

                   (c)     the importance of ensuring customer awareness and knowledge of the competitive telecommunications environment by the time a ballot is held;

       (d)             the desirability of providing Optus Networks with an opportunity to establish its name in the market, to familiarise customers with its services and to gain knowledge of customers by the time a ballot is held;

       (e)     the desirability of achieving customer response to a ballot process as early as possible in that process, principally by maximising the response rate to the first ballot;

       (f)      a recognition that each ballot has certain costs, both in terms of the financial cost to the Carriers and the potential adverse reaction of customers;

                   (g)             the provision of an orderly and organised way in which customers have the opportunity freely to make an informed, positive choice of Preferred Carrier for those services that are subject to Preselection;

       (h)             the importance of respecting the proper rights and expectations of customers, including their right to privacy and freedom of choice, and of ensuring that these rights are not compromised or jeopardised in any way;

       (i)      the desirability of structuring the customer choice process such that, to the maximum extent possible, customers will have the opportunity to make their own decisions on issues affecting them and have the final say on such issues; and

       (j)      the desirability of any restrictions or constraints on Carrier activities prior to and during the customer choice process being minimised and that only those activities considered likely to compromise or be detrimental to a customer’s opportunity freely to make an informed, positive choice are to be subject to agreed conditions or constraints.”

58                  Another provision points, less directly, to the purpose and objectives of the schedule.  Clause 13.3A.1 provides:

“13.3A.1         General

In relation to Preselection Implementation, resolution of the issue of the co-existence and interaction of Preselectable Services which are Preselectable Communications and other Telecommunications Services (including other Communications which are or involve Preselectable Services) will be in accordance and consistent with the Government policy set out in the Telecommunications Act and in the following paragraphs of the letter from the Minister of Communications to AUSTEL dated 27 April 1993 (‘the Minister’s Letter’):

 

            “In general terms, however, it is important that the ballot be as wide as practicable in its coverage.”

 

            “Given that consumer interests as well as competition policy considerations are at the heart of this issue, the Government’s policy position would require that where a customer has preselected a Carrier for a category of service, all that customer’s calls in that category should automatically be carried by the preselected Carrier.  This would be the case regardless of how those calls were dialled, unless the customer specifically chooses otherwise, such as by using override codes or by selecting a particular service that involves a variation to the preselection decision.”

 

            “Customer’s preselection decisions should not be frustrated or by-passed by any pre-existing arrangements with Telecom.  For example, it seems to me that abbreviated dialling features associated with particular existing local exchange capabilities should in future deliver relevant calls automatically to the preselected Carrier, unless the customer overrides that selection on a case-by-case basis.”

 

[Note:  The paragraph appearing in the Minister’s letter between these 2 quoted paragraphs has been omitted from this quotation.]

 

            “Any other outcome would seem to risk the bundling of services currently provided at the local exchange level (where competition will be slower to emerge because of structural and technological obstacles) with other services where competition is more immediately practicable.  This would risk adverse effects on the emergence of competition.  Such effects would be inconsistent with the intent of policy and the legislation.”

59                  Schedule 13 contains two provisions which Optus claims Telstra has breached.  One concerns the Preselection System, cl 13.5.3(a).  It (and a related provision) are:

“13.5.3(a)       Subject to sub-paragraphs (b) and (c), each Carrier will ensure that its Preselection Systems are in place within a ballot area at least by the Ballot Nomination Date of that ballot area for that ICCA.  Each Carrier will certify to the ballot administrator and the Other Carrier as soon as its Preselection Systems are in place in a ballot area.”

            …

“13.3A.5(b)     Unless and until the Carriers negotiate the implementation of Preselection in respect of ISDN lines, in respect of each ISDN line which becomes a Preselected Line, LEC Override will be implemented and made available to the Service customer by the Local Exchange Carrier from the same time as under this Schedule, in the absence of this paragraph 13.3A, Preselection would be required to be implemented and made available in respect of that ISDN line.  Subject to sub-paragraph (d), in this Schedule, except in this paragraph 13.3A, in relation to ISDN lines references to Preselection are to have effect as references to LEC Override where the context requires.”(Emphasis added)

60                  To ascertain the contents of the obligation created by the cl 13.5.3(a) it is necessary to refer to the definitions of "Preselection" and "Preselection Systems" in cl 13.2 of sch 13.  Those definitions provide:

“‘Preselection’ means the service made available by the Local Exchange Carrier to a Service Customer in respect of a Preselected Line which will:

(a)       permit designation by the Service Customer of one of the Carriers as the Preferred Carrier;

(b)       route all Preselected Communications to the Preferred Carrier;

(c)        route Override Communications to the Override Carrier; and

(d)       allow the Service Customer to change from time to time the designation of Preferred Carrier for that Preselected Line.”  (Emphasis added)

…

“‘Preselection Systems’ mean the technical, operational and administrative systems within a Carrier’s Network to make available Preselection in respect of Eligible Preselection Lines for which that Carrier is the Local exchange Carrier, and to enable the ‘12711” free call telephone service to be made available in accordance with paragraph 13.17.2, and further includes in respect of Telstra, the systems and solutions required to be implemented to enable LEC Override to be made available for ISDN lines, Preselectable Telstra Easy Calls and Preselectable VPN and Centrex calls, in accordance with the provisions of paragraph 13.3A.”(Emphasis added)

 

61                  Another basis on which Optus claims Telstra has breached the Access Agreement involves a provision concerning anti-competitive tariffing.  The relevant provision is:

“13.3.7            The Carriers will not undermine the integrity of the Preselection process through their tariffing of Preselectable Services in an anti-competitive way.”

62                  The definition of "Preselectable Services" is relevant to the operation of that provision:

“‘Preselectable Services’ means the following single category of Telecommunications Services which are accessed by non-Carrier specific dial codes:

(a)       National Long Distance Calls;

(b)       international direct dialled telephone calls, prefixed with the dial code ‘0011’ (for both voice and data on the voice band) or its successor non-Carrier specific dial code;

(c)        operator connected calls prefixed with the dial codes ‘011’ and ‘0101’ or their successor non-Carrier specific dial codes;

(d)       call charge inquiry calls prefixed with the dial codes ‘012’ and ‘0102’ or their successor non-Carrier specific dial codes;

(e)        international directory assistance calls prefixed with the dial code ‘0103’ and international service difficulties prefixed calls with the dial code ‘0100’ or their respective successor non-Carrier specific dial codes;

(f)        international ‘ring-back’ call charge inquiries prefixed with the ‘0012’ code or its successor non-Carrier specific dial code;

(g)       other services agreed by the Carriers and AUSTEL from time to time;

and for the purposes of clarification:

(h)       the term Preselectable Services excludes reverse charge (or collect) calls accessed through the dial code ‘0176’ and its successor code but includes calls of that type accessed through non-Carrier specific dial codes for operator services which are Preselectable Services.”

63                  The last provision of significance, and which Optus claims Telstra has breached, concerns the conduct of the parties to the Access Agreement.  It is a provision found in the main body of that agreement and reads:

“20.8   Each party agrees that it will act in good faith in relation to each other party with respect to all matters relating to or contemplated by this agreement.”

64                  Reference should also be made to cl 2 of the Access Agreement which deals with its scope.  That clause relevantly provides:

“2.       SCOPE OF AGREEMENT

2.1       For the avoidance of doubt, this agreement is intended to apply only to the provision of Services by one party to another party and to related matters concerning the parties and may not be construed as conferring benefits on third persons.

…

2.3       (a)        The parties agree and acknowledge that the governing principle of this agreement is that Telstra and Optus, while they are competing Carriers, are, generally in respect of Interconnection Service, Interconnect Support, Operations and Maintenance Support, Access Service, Raw Data for Directories Purposes and Supplementary Access Condition Services, in a Carrier-to-Carrier relationship and not a Carrier-to-customer relationship.  Accordingly, the Carriers will treat each other on a non-discriminatory basis (‘the requirement of non-discrimination’) in recognition of the fact that in Australia licensed carriers are primary providers of Australia’s Telecommunications Networks and primary suppliers of Telecommunications Services and that, for these purposes, their Network Facilities are interconnected.  This governing principle will govern the manner in which the parties fulfil their mutual obligations under law and this agreement for the purposes of enabling them to compete with each other on an equal basis.  As illustration of this governing principle:

                       (i)         to the extent technically feasible, a Carrier will treat the Other Carrier and its own operations on a non-discriminatory basis in relation to the technical and operational quality of services provided (including but not limited to quality, availability and time of provision);

                       (ii)        a Carrier will treat all customers who are similarly situated on a non-discriminatory basis with particular application to:

                                   (A)        to the extent technically feasible, the transparency, from the perspective of users of Telecommunications Services of interconnected Networks, of the carriage of Communications across the Network of the Access Carrier; and

                                   (B)        the standard and quality of services (including without limitation),

·        the publication of listings and advertisements in Directories (for so long as the Carrier is subject to an obligation under law to publish Directories which include listings of customers of the Other Carrier),

·        Operator Assistance Service,

·        Directory Assistance Service, and

·        billing services,

                                                           

                                                            which the Access Carrier supplies to customers of the Interconnecting Carrier, where those services are associated with or incidental to the supply of Telecommunications Services by the Interconnecting Carrier; and

                                               (C)        the ability of the Interconnecting Carrier’s customers to send or receive Communications across other Networks interconnected with the Access Carrier’s Network.

                                               Customers will not be deemed not similarly situated merely because they are customers of different Carriers.

                                    (b)       …

2.4       The purpose of clause 2.3 is to promote and safeguard and protect competition between Carriers in the provision of Telecommunications Networks and Telecommunications Services.  The principle set out in clause 2.3 will be implemented in a way which facilitates and does not inhibit competition between the Carriers in the provision of Telecommunications Networks and the provision of Telecommunications Services to customers.  The operational implementation of this principle is set out, in part, in the schedules and may be further agreed by the ICRG.

2.5       …

2.8       This agreement establishes a framework for the provision of Interconnection Service and Access Service.  The parties have agreed on terms and conditions in respect of the provision of certain kinds of Interconnection Service and certain kinds of Access Service and these matters are included in the schedules. …”

I will return to consider the effect of many of these provisions (and other related provisions) later in this judgment.

Other Evidence

65                  Much of the relevant evidence has been referred to already.  However it is necessary to refer to some of the evidence concerning specific matters of detail.  The HomeLine Net service was developed within Telstra during January and February 2001.  In evidence are the minutes of a series of meetings of Telstra employees engaged in its development.  The minutes reveal that, on 22 January 2001, it was proposed that "IXBAR" be included in instructions for the implementation of the HomeLine Net service.  This proposal (and variants of it) are referred to in minutes of similar meetings held on 24, 25, 29, 30 and 31 January and 2,5, and 6 February 2001.  However the minutes of a meeting of 8 February 2001 show that this proposal had been abandoned.  The minutes record that "IXBAR to be removed from HomeLine Net".  During cross-examination Douglas explained what "IXBAR" meant. It was a reference to a computer-generated technical facility (giving an instruction or command to a telephone exchange) that Telstra could activate which prevented or barred a customer from making a particular call type or call types from their phone. 

66                  Further meetings took place on 9, 12, 13, 14, 15, 16 and 22 February 2001.  In the minutes of the meeting of 22 February 2001 there is a note to the effect that a condition of the service was to be that all preselected calls were with Telstra and there would be no override.  At various points in this judgment I refer to this requirement as a condition which was later reflected in the customer agreement. I do not intend to characterise the requirement as a condition for the purposes of the law of contract.

67                  On 1 February 2001, solicitors acting for Optus wrote to Telstra raising concerns about the HomeLine Net service.  The solicitors said that Optus was primarily concerned "about a further condition of the HomeLine Net Service which requires customers to forgo the right to override the preselection choice to Telstra for all STD, International and calls to mobiles."  In the letter the solicitors alleged that Telstra was in breach of various of its obligations (derived from several sources) including obligations under the Access Agreement.  It was alleged that Telstra was in breach of cl 4 of the Access Agreement by preventing customers from obtaining communications services from Optus and by refusing to provide originating access services for override calls from such customers lines.  A Telstra employee from its Legal and Regulatory Directorate responded by letter dated 9 February 2001 rejecting the various allegations made by Optus' solicitors.  There was further correspondence including a letter from Optus' solicitors of 21 February 2001 enclosing a Telstra news release explaining that a condition of the HomeLine Net service was that customers must choose not to override.  In a letter dated 26 February 2001, solicitors acting for Telstra denied that the imposition of this condition constituted, amongst other things, a contravention of the Access Agreement.

68                  Walther attended all but three of the meetings referred to earlier. He was cross examined about what was discussed.  He said he had primary carriage of the project.  He said that through early January the intention was to apply the "IXBAR".  However during the "sign off procedure" for the product he sought a "legal sign off" and was given an instruction from Telstra's legal department to change the terms of the service.  He could not say precisely when the instruction issued.  He accepted that the original intention was to impose a bar to ensure customers did not make override calls.  While he did not accept that the later proposal to impose a condition not to override was intended to achieve the same result, he accepted that a known consequence of imposing a condition not to override was that subscribers to that service would only use Telstra for their long-distance calls.

69                  I am satisfied that the Telstra employees developing the HomeLine Net service were proposing until early February 2001 that a subscriber to the HomeLine Net service would be prevented from making certain classes or types of calls by rendering it physically impossible for the calls to be made.  This would have been achieved by physically preventing the subscriber from using override access.  I am also satisfied that the decision to impose the contractual term was made to achieve the same result.  That is, the decision to impose the condition was made to stop a subscriber using override access.  While there is no evidence directly linking the change of approach to the letters of complaint from solicitors acting for Optus, I am satisfied the preferable inference is that the letter of 1 February 2001 gave rise to the instruction to abandon the use of a bar.  The sequence of events and the timing of the instruction would sustain such an inference and the failure of Telstra to call evidence demonstrating that the instruction was given for some other reason enables the inference to more readily be drawn: see Cubillo v Commonwealth (No 2) (2000) 103 FCR 1 at [353]-[362].

Issues and their consideration

70                  A convenient way of dealing with the issues raised in these proceedings is to consider separately the various ways in which Telstra is said to have breached the Access Agreement and also to have contravened s 52.  I am mindful, however, of the need to pay regard to the Access Agreement as a whole in determining the rights and obligations it creates and whether it has been breached. In this discussion I adopt, again only for convenience, the language used by counsel for Optus in describing the clauses in their submissions. 

71                  Before descending into detail I should note some relevant principles of construction which have been helpfully gathered together by Finkelstein J in Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liquidation) [2001] FCA 1628 at [47]:

“The object of construing any contract is to discover the mutual intention of the parties in relation to the legal obligations each assumed by their chosen language: Pioneer Shipping Ltd v B T P Tioxide Ltd [1982] AC 724.  This intention is not what the parties actually (that is subjectively) intended, but rather what is taken objectively to be their intention having regard to the language that they used, in the circumstances in which the contract was made:  Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337.  To ascertain that intention it is usually best to begin with the words the parties used and, at least when the parties are knowledgable, experienced and legally advised, to assume that they intended what they have said: Board of Trustees of the National Provident Fund v Shortland Securities Ltd [1996] 1 NZLR 45.  Of course, it is always necessary to determine the meaning of the words used in the context in which they are used; that context being the whole contract and the circumstances surrounding the contract.  If that approach produces an obviously absurd result, in some cases the absurdity may be avoided in favour of a sensible result:  Torvald Klaveness A/S v Arni Maritime Corporation [1994] 1 WLR 1465.  This is because the court will assume that the parties did not intend their bargain to bring about irrational consequences.  However, a judge must be cautious when there is an attempt to sway a case by reference to commercial good sense, because views may easily differ on what is good sense, and in some cases a party is willing to bargain away a good sense result on one aspect of a contract because of a perceived advantage in another:  Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd [1990] 1 QB 818.”

72                  While his Honour does not discuss the distinction that is traditionally drawn between the construction of contracts where the relevant term is clear and where it is not, the distinction was referred to by French J in Futuris Corporation Limited (ACN 004 336 636) v ERG Limited (ACN 998 112 625) [2001] FCA 1126at [381]:

“The exercise of interpretation takes as its point of departure the ordinary meaning of the words in their context as part of the entire agreement.  If the meaning of the relevant clause, when so read, is clear and unambiguous, the unqualified words will be given their effect – Metropolitan Gas Co v The Federated Gas Employees’ Industrial Union (1925) 35 CLR 449 at 455 (Isaacs and Rich JJ).  When the language of the contract is ambiguous or bears more than one possible construction, evidence of its surrounding circumstances may be relied upon to determine what is the construction which best reflects the presumed intention of the parties in the objective framework of facts within which the contract came into existence – Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 351-352 (Mason J).  Antecedent negotiations may establish objective background facts known to both parties and the subject matter of the contract.  They may not be relied upon to establish the actual intentions and expectations – Codelfa at 352.”

73                  Moreover, as Stone J noted in Vasram v AMP Life Limited [2000] FCA 1916 at [14]:

“Interpreting a contract requires the Court to consider the whole of the instrument in which the contract is embodied. It must discern the intention of the parties from the words used in the instrument; Australian Broadcasting Commission v Australian Performing Right Association Ltd (1973) 129 CLR 99.  The words of the contract are to be given their “natural meaning”; Hide & Skin Trading v Oceanic Meat (1990) 20 NSWLR 310 at 313 per Kirby P.  Where the words of the instrument have a clear and unambiguous meaning, it is neither necessary nor permissible to go beyond that meaning. This is so even if the meaning appears “capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different”; Australian Broadcasting Commission v Australian Performing Right Association (above) at 109.”

I turn now to consider the breaches alleged by Optus.

(i)                 Breach of the Access Service Obligation

 

74                  Clause 4.1 (set out at [54] above) obliges an Access Carrier to provide requested Access Service in accordance with the relevant Provisioning Procedures. In the context of the HomeLine Net service, Telstra is the Access Carrier and Optus an Interconnecting Carrier.  Counsel for Optus submitted that the provision of Access Service involved the actual carriage of the communication and not merely the provision of technical capability to do so.

75                  In support of this construction of the Access Agreement, reference was made to cl 2.2.6.1 of sch 2 (Provisioning) (this schedule contains the procedures governing the forecasting, planning and ordering of relevant services which are "Service Ordering Procedures" as defined which enliven the operation of cl 4.1) which contemplates that an Access Carrier will plan the provision of access having regard to six monthly forecasts provided by an Interconnecting Carrier about traffic (following the provision of access).  The purpose of requiring these forecasts, it was submitted, was to enable Telstra to ensure it had the capacity to provide the relevant service having regard to the volume of communications.  The Access Carrier must provide sufficient capacity (at a specified quality) to provide Access Service: see cl 2.2.6.3.  Reference was also made to cl 2.2.6.2 which establishes a regime for testing after the initial provision or major upgrade of an Access Service.  It was submitted that this provision revealed a distinction between technical capacity (existing prior to testing) and the provision of the service.

76                  Counsel for Optus also referred to various other provisions in the Access Agreement which were said to illustrate that the provision of Access Service involves the actual carriage of calls.  This was evident in the definition of "Access Service".  Also cl 1.51 deems a Domestic Originating Access Service to be provided once the call had been carried from the calling number to a particular point in the Access Carrier's network.  This proposition was also illustrated by cl 1.3.1 which refers to a service being provided from one point in a network to another.  It was also noted that sch 9 requires, in relation to a particular call, that (in certain circumstances) information must be provided by the Access Carrier to the Interconnecting Carrier.

77                  Counsel for Optus relied particularly on cl 1.2.1 of sch 1 (set out at [55] above).  Several matters pointed to a conclusion that Telstra agreed, having regard to this clause, it would provide to customers who were directly connected to the Telstra network, the service of carrying all of each customer's communications prefixed by Optus' carrier selection code (or the override code) and was obliged to do so.  This was apparently because the expression in cl 1.2.1, "Carrier Selection Code" includes the override code.

78                  It was submitted by counsel for Optus that Telstra had directly breached the access service obligation because Telstra could not provide this service to a customer whom it had subjected to a legal obligation not to accept that service.  Alternatively, it was submitted, Telstra had breached an implied obligation to give Optus the benefit of the Access Agreement.  This arose because Optus was deprived of the benefit flowing from a customer having an opportunity to acquire services from Optus by using override. 

79                  Counsel for Telstra put in issue this construction of the Access Agreement.  The definition of "Access Carrier" pointed to the provision of "a Service", in the singular, to an Interconnecting Carrier.  The service was provided when it was requested.  The singularity of the service was reinforced by the definition of "Access Service" which also spoke of the service as being the carriage of communications between two points.  The Access Agreement contemplated that the request for Access Service was made from one carrier to another.  When provided, it was to be provided in accordance with the provisioning procedures in schedule 2.  "Access Service" concerned services of a technical nature to be provided as and when requested.  Counsel rejected the suggestion that there was notionally a request by the carrier each time a call was or was proposed to be made by the customer.  The provisions concerning provisioning and forecasting, technical set up and testing and the provision of information were all consistent with the "Access Service" involving the provision of services of a technical nature.

80                  Telstra's responses to the submission of Optus that there had been a breach of an implied obligation not to deny Optus the benefit of the agreement were twofold.  The first was that the contractual arrangement between Telstra and a customer subscribing to the HomeLine Net service including no use of the override code does not affect the provision of the "Access Service" at all.  Secondly it could not have been in the contemplation of the parties that each would not be able to induce the customers of the other to use its services, for example, by offering an incentive to discourage the customer from using the override code.  Telstra submitted that even if the real point of the Optus submission was that Telstra allegedly breached an implied obligation to co-operate, the obligation would operate only in relation to a benefit conferred by the Access Agreement.  No such benefit could be identified.  Reference was made to the judgment of the Court of Appeal of New South Wales in Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 at 124-125

81                  I am satisfied that by requiring a subscriber to the HomeLine Net service not to use the override facility, Telstra is not, directly or indirectly, breaching the contractual obligation to provide Optus with "Access Service" as contemplated by cl 4.1 or breaching some other obligation operating by reference to that clause.  In determining the nature of the rights and duties arising under that provision, the starting point is the terms of clause viewed in the context of the instrument as a whole.  The Access Agreement is, as a whole, directed to the interconnection of the networks of Optus and Telstra and the means of dealing with their co-dependency once interconnection has been achieved (even though, as a matter of fact, Telstra was and remains the dominant partner, at least in the sense of the size of its network, in the alliance created by the deregulatory policy which resulted in Optus' entrance into the market).  The Access Agreement is generally directed to creating the environment, including technical environment, in which Telstra and Optus can compete while being co-dependent.

82                  Clause 4.1 obliges the Access Carrier to provide Access Service if several conditions are satisfied.  The first two, which are reflected in the opening line of the clause, indicate that the obligation to provide Access Service depends upon prior interconnection and agreement on the terms and conditions of that interconnection. The immediate and operative condition creating the obligation to provide Access Service is that the service has been requested by the Interconnecting Carrier.  It is a service provided by one Carrier to another.  Moreover in making the request, the Interconnecting Carrier must have complied with the relevant Service Ordering Procedures.  Having regard to the definition of that last mentioned expression, one goes to sch 2 to ascertain what the Interconnecting Carrier must comply with to satisfy this condition.  In relation to Domestic PSTN Originating Access (facilitated by carrier selection codes including the override code), ordering (for delivery after 30 June 1993) is effected by the Interconnecting Carrier giving six and 12 monthly forecasts.  Those forecasts are to enable the Access Carrier to plan.  In my opinion, the obligation on the Access Carrier is to provide the infrastructure (in a technical sense) to enable the Interconnecting Carrier to use the network and facilities of the Access Carrier to meet the Interconnecting Carrier's obligations to its customers to carry communications from one point to another.  The planning is necessary to enable that to occur.  It is the obligation to provide that infrastructure to which cl 4.1 is directed.

83                  Clause 4.1 requires that Access Service is to be provided in accordance with the relevant Provisioning Procedures.  It might be thought that the definition of “Access Service” and “Services” as well as the contents of the “Provisioning Procedures” would illuminate what it was that had to be provided, namely “Access Service”.  The definition of “Access Service” speaks of “a service for the carriage of communications” between various points.  However the definition effectively begs the question of what is the “service” for present purposes.  The definition of “Services” is probably intended to give meaning to the word “service” in the opening words of the definition of “Access Service” even though “service” is in the singular and the “s” is lower case.  That the definition operates in this way is consistent with the definition of "Access Carrier " and "Interconnection Carrier" which both speak, in substance, of "Service" being provided to or by the relevant Carrier.  However, the definition of "Services" is in the widest of terms and, for present purposes, of limited assistance as that definition itself refers to “Access Service”.  The definition is, in this respect, somewhat circular.  However what I view as the meaning of the expression “Access Service” and the nature of the obligation imposed by cl 4.1, is consistent with the definition of both “Access Service” and “Services”.

84                  The Provisioning Procedures deal with not only ordering but also delivery.  In relation to Access Services (involving PSTN Originating and Terminating Access), the Access Carrier is obliged, by cl 2.2.6.3, to provide sufficient Network Capacity (defined in the main body of the Access Agreement as “additional equipment and facilities required to be installed in the Access Carrier’s Network for the use in the provision of an Access Service but does not include Interconnect capacity”) for the provision of relevant Access Service.  Also cl 2.2.6.4 requires both Optus and Telstra to create and respond to “Network Conditioning” (defined as “the conditioning, equipping and installation of facilities in the Access Carrier’s Network to enable the provision of one or more Access Services but does not include Interconnect Conditioning”).  Delivery involves obligations concerning Network Capacity and Network Conditioning and are features of delivery that point fairly clearly, in my opinion, to Access Service as relating, as just discussed, to the provision of infrastructure.  Telstra continues to provide Optus with that infrastructure even though subscribers to HomeLine Net might not avail themselves of all aspects of it to access the Optus network.  Thus there is no breach of cl 4.1.  Nor is Optus deprived of the benefit of cl 4.1.

85                  The benefit the Interconnecting Carrier derives from cl 4.1 is access to the network and facilities of the Access Carrier which enables it to provide or offer a range of telecommunications services to its customers or potential customers.  In the present case, the Interconnecting Carrier, Optus, is not, in my opinion, deprived of the benefit conferred by the clause if the Access Carrier, Telstra, induces its customers (reflected in a contractual commitment) not to use an aspect of the facilities made available to the Interconnecting Carrier which could be used by the Access Carrier's customers (and potentially to the benefit of the Interconnecting Carrier).  That is so notwithstanding that the particular facility could be used by the customer because cl 4.1 obliges Telstra to make it available and continue to make it available (subject to the satisfaction of the various conditions in the clause).  The extent of any obligation Telstra might have which was implied by law would be to co-operate to ensure that Optus enjoyed the benefit referred to the beginning of this paragraph: see Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (supra) at 125.  It still enjoys the benefit though any offer of services it makes will, to the extended override is involved, not be taken up by subscribers to HomeLine Net because of their contractual commitment.  In my opinion, if the submission of Optus was accepted it would involve overstating the benefit derived from the clause and the obligation to co-operate implied by law.  In making these observations I am putting to one side, for the moment, the submission of Optus based on cl 20.8.

(ii)               Breach of the Barring Obligation

 

86                  Counsel for Optus submitted that Telstra agreed in cl 1.5.3 (set out at [56] above) it would not agree with a customer to bar a customer's access to, relevantly, Optus' trunk call services without also barring access to Telstra's equivalent services.  In substance, Telstra would not act so as to preclude the customer from having access to Optus and not Telstra.  It was accepted by counsel for Optus that barring was a technical mechanism to stop a particular call from being made.  However, it was submitted, the contractual obligation of a HomeLine Net subscriber not to use override was developed as a means of achieving what had earlier been proposed, namely placing a bar on the service of a HomeLine Net subscriber to prevent, amongst other things, the subscriber using Optus’ trunk call services (without barring use of Telstra's equivalent services).  Counsel for Optus submitted that Telstra had breached an implied obligation to give Optus the benefit of the Access Agreement by creating a legal bar between the customer and Optus which does not also bar Telstra and has the same practical effect as the technical bar.  Counsel for Optus submitted this also constituted a breach of Telstra's obligation of good faith.

87                  Counsel for Telstra submitted that for Optus' submission to succeed it would be necessary to imply into the Access Agreement a term to the effect that both parties agreed not to enter a contract with a customer which directly or indirectly precludes the customer from foregoing his or her rights to make override calls.  As to the specific terms of cl 1.5.3, counsel for Telstra submitted that the purpose of the provision was to ensure that one carrier would not be at commercial risk as a result of having carried trunk calls for the customer of another carrier after the customer had requested the other carrier to bar trunk calls.  Service specific barring was addressed by cl 1.5.5 and an Access Carrier cannot act on a request for service specific barring blocking access to the Interconnecting Carrier's network without first obtaining the consent of the Interconnecting Carrier.  An example of the operation of this provision would be if a Telstra customer asked Telstra to bar the use of the specific service of international override.  That is to bar use of the override facility to access international trunk calls through Optus.  Telstra could not do so without seeking the consent of Optus.

88                  In my opinion, what cl 1.5 means is tolerably clear and its operation was intended to be limited.  Clause 1.5.3 concerns a request to bar switched direct dial trunk calls which must be implemented by the Access Carrier to stop switched direct dial trunk calls (national and/or international) being made over the network of either Carrier.  The mechanism established to achieve that result depends on who the customer contacts.  Clause 1.5.4 sets out the mechanism.  While on one view, cl 1.5.5 deals (differently) with the same subject matter as cl 1.5.3/.4 (barring of access for national or international switched direct dial trunk calls), it is appropriate to construe the clause to give meaning to all parts and arrive at a construction resulting in internal harmony.  The better view is that the expression "service specific barring" in cl 1.5.5 is intended, as counsel for Telstra submitted, to cover at least a request that the override facility, as it might apply to trunk calls, be rendered inoperative.

89                  The direct benefit conferred on Optus by cl 1.5.3 is that it will not carry trunk calls of a customer who has requested that such calls be barred. In this way the provision ensures that Optus will not be exposed to commercial risk (such as a customer refusing to pay for trunk calls carried over its network notwithstanding that the customer had made a request to bar such calls) because Telstra failed to perfect a request to bar them. 

90                  I accept that the decision of Telstra to impose a condition that a subscriber to HomeLine Net not use the override facility was adopted because the proposal to bar the use of that facility (and calls made using it) was abandoned in the face of complaint by solicitors acting for Optus.  However the fact that this was the genesis of the decision does not, in my opinion, sustain the conclusion that the imposition of the condition deprives Optus of the benefit of cl 1.5.3.  As just discussed, the benefit is more limited.  Had Telstra proceeded with its original proposal and, as a result, a subscriber expressly or impliedly requested the barring of calls using the override facility by subscribing to HomeLine Net, an issue could have arisen about the operation of cl 1.5.5.  However that proposal was abandoned.

 

 

 

(iii)       Breach of the Preselection Availability Obligation

91                  Clause 13.5.3(a) of sch 13 is set out at [59] above.  The provision obliged the Carriers, Optus and Telstra, to ensure that the Preselection Systems of each were in place, effectively, before preselection ballots were conducted.  Counsel for Optus submitted, in relation to Telstra's HomeLine Net customers, Telstra must make available to them the service of routing all their preselected communications to Telstra and override communications to the override carrier.  It was submitted that the service is not available merely because the network is technically capable of providing the service.  The provision has this effect having regard to the definition of Preselection Systems (set out in [60] above).  Counsel for Optus submitted that a distinction was drawn in related provisions between "preselection capability" and "preselection availability" (cl 13.2.3), implementation of the service described as Local Exchange Carrier Override (an earlier version of the override code) and availability of the service (cl 13.3A.5(b)) and implementation of Preselection and it being made available.  It was submitted that these provisions indicate that Optus and Telstra intended to allow customers to acquire services from the non-directly connected Carrier.  In circumstances where Optus was the new entrant and most customers were directly connected to Telstra, this meant that customers would be able to acquire services from Optus by dialling an override code.  It was no answer to say that Preselection was made available to a HomeLine Net subscriber but that the subscriber simply chose not to accept it.  Preselection must be continuously available.  Further, it was submitted, it was no answer to say that the subscriber was able to remove the inhibition on using override, and make available Preselection, by terminating the HomeLine Net service.

92                  Counsel for Telstra accepted that Preselection was a service made available to the Service Customer.  It was submitted, however, that cl 13.5.3(a) concerned what had to be done within a particular time which has now long past.  The other provisions which Optus called in aid did not advance the argument.

93                  In my opinion, cl 13.5.3(a) served a specific and limited purpose.  It was to ensure that before ballots of customers were conducted, both Optus and Telstra had in place the technical, operational and administrative systems that would enable the customer choice (of Preferred Carrier) to be given effect to while enabling the customer to access the network of the Override Carrier.  It was in this sense that a Carrier (who was the Local Exchange Carrier) had to make available Preselection including a service which would route Override Communications to the Override Carrier.  It was a provision intended to create the environment in which the choice of the customer would be an effective choice.  I doubt that the provision was intended to create an enduring obligation on the part of each Carrier (but cf cl 13.3.9) though even if it was, it was to make available Preselection in the way discussed.  That is, it was not intended to require each Carrier (in the present case, Telstra) to ensure that a customer would remain able to use Preselection in the sense of not agreeing not to use it or any aspect of it.

(iii)             Breach of the Tariff Obligation

 

94                  By cl 13.3.7 (set out at [61] above), Optus and Telstra agreed not to undermine the "Preselection process" by tariffing Preselected Services in an anti-competitive way.  It was common ground that the imposition of a condition for the provision of a service was comprehended by "tariffing". 

95                  Counsel for Optus submitted that it was intended that customers were to have two choices when making calls.  The first was the default choice (to the Preferred Carrier) and the second was the override choice (to the Override Carrier).  The former involves considered selection and the latter is fleeting and involves no further commitment.  These were two features of Preselection.  The contentious condition in the HomeLine Net service rendered the override choice identical to the default choice.  Moreover sch 13 contemplates competition for customers within a particular framework and not simply in relation to price (dealt with by cl 13.13.12(a)).  If a tariff (the contentious condition) alters the agreed competitive framework then it is, to that extent, anti-competitive.  Counsel referred to several specific matters, which need not be detailed, to illustrate how the alteration was significant.

96                  Counsel for Telstra submitted that the contentious condition did not impose a tariff for Preselectable Services.  It imposed restriction on the use of one, but did not provide a tariff on any of them.  The variant of this submission appeared to be that the contentious condition related to the acquisition of services which were not Preselectable Services.  It was also submitted that even if it did, it was not anti-competitive.  No submission was made by Telstra that the expression "Preselection process" was synonymous with "Preselection Implementation" (nor was the issue addressed by counsel for Optus).  In other words, no submission was made that the obligation imposed by cl 13.3.7 was intended only to limit the conduct of Optus and Telstra during the transitional period in which ballots were being conducted to make Preselection available initially.  Indeed it appeared to be common ground that the provision precluded anti-competitive tariffing of Preselectable Services at any time.

97                  The first question raised by the submissions concerns the scope of cl 13.3.7.  The clause deals with the "tariffing of Preselectable Services".  The expression "Preselectable Services" is defined (set out at [62] above) as "the following single category of Telecommunications Services which are accessed by non-Carrier specific dial codes".  There then follows a list of what are apparently each to be viewed as a Telecommunication Service.  The expression "Telecommunications Service" (in the singular) is, in cl 1 in the main body of the Access Agreement, given the same meaning as in the Telecommunications Act 1991 (Cth) which is that "[the expression] means a service for carrying Communications by means of guided or unguided electromagnetic energy or both".  It was common ground that mobile phone calls were to be treated as included in the list (I assume because of agreement reached in accordance with (g)).

98                  The submissions (oral and written) of both Optus and Telstra did not involve any detailed analysis of the definition of Preselectable Services.  However one of the defined characteristics of Preselectable Services is that they are "accessed by non-Carrier specific dial codes".  One of the defining characteristics of an "Override Communication" is that it comes about as a result of the calling party prefixing the call with the Carrier Selection Code.  That last mentioned expression is relevantly defined in cl 1 of the Access Agreement as the code for each Carrier which determines the Carrier to which the communication is routed.  The anti-competitive feature complained of by Optus is that Override Communications cannot be made by a subscriber to HomeLine Net.  It is tolerably clear that calls entailing an Override Communication are not comprehended by the definition of "Preselectable Services".  Accordingly the condition imposed does not directly affect Preselectable Services in the sense of inhibiting or preventing calls of the type which constitute Preselectable Services.  Nonetheless the HomeLine Net service does include Preselectable Services and the contentious condition is imposed (given the concession by counsel for Telstra that tariffing could include the imposition of a condition) on the acquisition of those services.  It is likely that cl 13.3.7 was not intended to have an unduly narrow operation and I am satisfied that the imposition of the condition constitutes the "tariffing of Preselectable Services".

99                  The question that then arises is whether the imposition of the contentious condition undermines the integrity of the Preselection process in an anti-competitive way.  I have already noted that no submissions were made about what "Preselection process" meant.  Is it to be taken to be a reference simply to "Preselection" or is it a reference to something more or different?  The best that can be said is that it is probably a reference to Preselection as made  available by either Carrier in their capacity as a Local Exchange Carrier.  If so, then it would include the service which would, relevantly, route Override Communications to the Override Carrier.  Is a condition that precludes for the time being (as a contractual term) a subscriber from using an aspect of Preselection (as defined), anti-competitive? Evidence referred to by Optus touched on the pricing structure used by Telstra (characterised by Optus as low line rental costs cross-subsidised by the revenue from the preselectable calls) to arrive at the overall price of the HomeLine Net service as a product.  However the submissions of Optus did not, as I understood them, go beyond saying that the anti-competitive feature of the tariff for that service were not the charge rates (or elements of them) but simply the condition requiring the customer not to use override.

100               The contentious condition would (having regard to the facts of this case) preclude, for example, Optus inducing the subscriber by competitive pricing or other means from spontaneously using override to access Optus' network for making one or a number of trunk calls.  It would, in this way, deny Optus a commercial opportunity that the overall scheme of interconnection and preselection was designed to provide.  I do not think it matters, as the evidence indicates, that it is not presently a feature of the market that carriers seek customers (who may ultimately alter their preselection), by offering special rates on trunk calls accessed by override.  The contentious condition will remove that opportunity, in relation to HomeLine Net customers, into the future.  It will remove a means of engaging in “rivalrous market behaviour”: see Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd (1976) 25 FLR 169 at 188. The contentious condition would also deny the subscriber the opportunity of taking advantage of the inducement offered by Optus.  However this situation is brought about by customer choice freely made.  Optus did not mount a case that it was unable to offer the same or a similar product to HomeLine Net notwithstanding that passing references were made both in the evidence and submissions to the line rental charges of Telstra as a component in the pricing of HomeLine Net and the dominant position of Telstra as the carrier directly connected to over 8 million residential homes. The underlying issue appears to be whether the competition contemplated by cl 13.3.7 would allow one Carrier to offer, competitively, a product which, if accepted, would deny (temporarily) the customer the opportunity of accepting a product offered by the other carrier and thus effectively deny that carrier the ability to compete.  Somewhat paradoxically it raises the question of whether the provision would allow for tariffing resulting in customer choice denying subsequent customer choice.

101               The objectives of the implementation of Preselection are found in cl 13.1.3 (set out at [57] above).  A recurrent theme in those objectives is customer choice.  While in some respects it a reference to the choice initially made in a ballot to select a Preferred Carrier, the language used is equally apt to apply to ongoing choice.  Objective (i) is directed, at least in part, to the future.  However it is customer choice in the context of competition.  The policy underlying the Access Agreement and reflected in the Minister's letter in cl 13.3A.1 (set out at [58] above) is customer choice based on what is offered, on ongoing basis, by the competing Carriers.  It appears to me that the tariffing of a product (even though selection of the product is the choice of the customer) that diminishes the capacity of one Carrier to offer choice is anti-competitive in the way contemplated by cl 13.3.7.  I accept that a customer can fairly readily terminate the HomeLine Net service.  However to do so would involve some active steps being taken and there could be, as the evidence revealed, some delay in termination being effected.  Spontaneous use of the override facility is effectively eliminated or at least substantially curtailed.

102               This reasoning may raise a question about whether either Carrier could offer Preselectable Services on terms that included a contractual term or period.  That is, a Carrier could not enter an agreement with a customer that the customer would use the Preselectable Services of that Carrier for an agreed period.  Such an arrangement might be viewed as depriving the other Carrier (by operation of a contractual term binding the subscriber) of the subscriber's custom for the duration of the agreement.  It appears that, as matter of fact, such provisions are commonplace.  However it has not been suggested that the conduct of the parties under the Access Agreement bears upon its meaning and its effect, in this context, was not the subject of submissions.

103               I am satisfied that Telstra has breached cl 13.3.7 by offering the HomeLine Net service on the basis that a subscriber will not use override to access the services of Optus.

 

(iv)             Breach of the Good Faith Obligation

104               Counsel for Optus submitted that not only was cl 20.8 (set out at [63] above) an express term requiring the parties to act in good faith it was wider in its scope and effect than the implied obligation to act in good faith: see Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349; Burger King Corporation v Hungry Jacks Pty Ltd [2001] NSWCA 187; Far Horizons Pty Ltd v McDonalds Australia Ltd [2000] VSC 310; and Garry Rogers Motors Australia Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903.  It is expressed as an obligation on each party to act in good faith in relation to the other "with respect to all matters relating to or contemplated by" the Access Agreement.  It was submitted that the clause expressly and deliberately went beyond the exercise of contractual powers and performance of contractual obligations.  In addition the terms and conditions on which a party, in this case Telstra, supplied telecommunications services to it residential customers directly connected to its network are matters comprehended by the expression "relating to all contemplated by in cl 20.8".  It followed, it was submitted that Telstra was required to act in good faith and fairly in relation to Optus in relation to the contractual arrangements pursuant to which it provided the HomeLine Net product.  While accepting that Telstra was entitled to promote its legitimate business interests, counsel for Optus submitted that Telstra could not thwart Optus' rights and benefits under the Access Agreement.  The submission was then made that what might be viewed as contradictory evidence about the reason why the contentious condition was imposed (the reselling of the HomeLine Net product by Telstra's competitors), illustrated Telstra's failure to act in good faith.

105               Counsel for Telstra submitted that an obligation to act in good faith did not operate to confer rights on parties to a contract which did not otherwise exist.  Reference was made passages in the judgment of the Court of Appeal in Burger King Corporation v Hungry Jacks Pty Ltd (supra).  In the present case there was no relevant benefit conferred on Optus by the Access Agreement in respect of which Telstra had not acted in good faith.

106               What might be the outer reaches of the operation of cl 20.8 need not be explored in these proceedings (though if the language expressly used does not clearly travel beyond the scope of the term that might otherwise be implied, its scope may be governed by the principle expressio eorum quae tacite insunt nihil operatur: see Lewison: The Interpretation of Contracts, 2nd edition, 1997 at 6.10).  It need not be explored because on the second day of the hearing counsel for Optus provided particulars of the allegation of lack of good faith after an issue arose about precisely what was alleged.  Those particulars stated that it was neither fair nor reasonable for Telstra to deprive Optus of the benefit of the provisions already discussed namely cll 4.1, 13.5.3(a) and 1.5.3 and in doing so Telstra failed to act in good faith.  As I have already discussed, I do not accept that these provisions confer the benefits contended by Optus.  It would appear to follow that the allegation of want of good faith, as particularised, must fail.

(v)               Contravention of s 52

107               In marketing the HomeLine Net service, Telstra says that "no override [is] available" (see [50] above).  In a press release, Telstra said "Customers must choose not to override."  Counsel for Optus submitted that in making these statements, Telstra was engaging in misleading and deceptive conduct.  That was because Telstra has failed to inform HomeLine Net customers that there was no consequence if the condition was breached or the consequence was entirely unclear.  This flows from there being no term or condition in the Standard Form of Agreement (including the general terms and conditions) enlivening Telstra's right to suspend, limit or cancel for breach.  It is also submitted that Telstra's conduct was misleading and deceptive because it did not not make clear there was no technical bar to using the override facility.

108               Counsel for Telstra submitted that it was common ground the contentious condition (that a subscriber to HomeLine Net could not use override) was a term of the contract between Telstra and the subscriber.  If the term was breached then Telstra had a contractual right to cancel the service.  While the condition not to use override was infelicitously expressed in cl 5 of the Public Switched Telephone Service Section which concerned charges, the agreement should be construed in a sensible commercial way: see McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; 176 ALR 711.  Telstra was entitled to act on the basis that a customer would comply with their contractual obligations.  In any event, Optus' allegations were, in substance, that Telstra was, in the circumstances, obliged to inform people who entered a contract that they need not be concerned about breaching it because it would be too difficult to ascertain if there had been a breach.

109               In my opinion, this issue can be readily resolved.  Putting to one side any question of the imposition of the contentious condition being a breach of the Access Agreement (which, in this context, Optus did not rely on), Telstra was simply stating in its promotional material what the position was.  That is, Telstra was stating the effect of a term in the contract entered into by a subscriber to the HomeLine Net service.  It is not, in my opinion, misleading or deceptive conduct on Telstra's part, to inform a potential party or a party to a contract that their conduct will be or is constrained by a term of the contract even though the contracting party will be able, in a physical sense, to engage in the conduct. 

110               The declaration in the advertising brochure that "No override available" appears in a list of what are effectively annotations identifying the features of the various services promoted in the brochure.  It is true that this statement appears in a context where the word "available" is used in a way that would suggest, elsewhere in the annotations (including No 8 set out at [50] above), that the service or feature was or was not physically available.  However it is improbable, in my opinion, that a person reading the brochure would take the reference to override as a statement concerning only its physical available.  The statement is in the context of a list of conditions and features concerning the various products.  It is more probable that it would convey the meaning that if a person subscribed to the HomeLine Net service the person would not be able to use override.  This statement is correct even though the inability flows from a contractual term.

Conclusion

111               I propose to make orders reflecting these reasons and to stand this matter over to enable the parties to address outstanding issues.

I certify that the preceding one hundred and eleven (111) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice .

Associate:

Dated:              14 December 2001

Counsel for the Applicant:	A J L Bannon SC and J Stoljar
Solicitor for the Applicant:	Gilbert & Tobin
Counsel for the Respondent:	T Bathurst QC and N Manousaridis
Solicitor for the Respondent:	Mallesons Stephen Jaques
Date of Hearing:	5 & 6 September 2001 and 25 & 26 October 2001
Date of Judgment:	14 December 2001