Telecom has rejected accusations it discriminated against its rivals and failed to give them equal access to its network, saying it will fight legal action taken by the Commerce Commission.
The commission claims Telecom should have let its competitors provide their own voice services from unbundled exchanges along with a higher speed Telecom broadband service from a roadside cabinet.
It argues Telecom's actions harmed competition, deterred investment and resulted in a significant commercial gain to the incumbent.
If proven, it could cost Telecom up to $10 million and $500,000 per day for ongoing breaches.
The Telecommunications Users Association says Telecom appears to have favoured its own retail arm over rivals.
Chief executive Paul Brislen says it reinforces the need for a strong regulator under an ultra fast broadband future.