Kogan Mobile has accused wholesale telco partner ispONE of ‘continually' breaching its agreement with the retailer by suspending and flagging Kogan's most active users.

Court documents filed this week by the technology retailer reveal an escalating conflict between Kogan and its telco wholesale partner.

This week, Kogan launched legal action against ispONE for blocking some Kogan Mobile customers from using its network due to ‘high-usage’. Kogan was later forced to offer compensation after customers complained of being suspended or unable to renew their plan for no reason.

Kogan publicly blamed ispONE for acting independently of the retailer and preventing select customers from extending their access after the three-month trial period.

In the court documents, Kogan executive director David Shafer accused ispONE of continuing to flag and suspend Kogan Mobile customers, despite agreeing not to after being reprimanded by the retailer.

Kogan and ispONE signed the wholesale agreement for telco services in August 2012, prior to the retailer’s December launch of its Mobile business unit. ispONE is a Telstra 3G wholesale reseller.

The mobile services provided through Kogan Mobile from ispONE offered unlimited standard mobile and national calls, unlimited texts and MMS, with a 6GB data limit per customer per month.

Customers signed on to a Kogan Mobile acceptable use policy, which was "substantially" based on a policy of the same name developed by ispONE.

This policy states that ‘Kogan Mobile customers must not stay connected to the service for an unreasonable amount of time, or download or upload an unreasonable amount of data’.

Both policies stated that the telcos reserved the right to ‘disconnect or separate into a separate pool the users that stay connected to the service for an unreasonable amount of time or download or upload an unreasonable amount data'.

What constituted an ‘unreasonable’ amount of time or data was not clarified under either agreement.

According to the documents, ispONE began suspending Kogan Mobile customers in January 2013 without notifying the retailer. Kogan contacted the ISP, asking it to cease suspending customers, which resulted in the pair negotiating a service suspension policy in February 2013.

The policy said ispONE must warn a Kogan Mobile customer deemed to be overusing their service three times before suspension. It also said ispONE must seek the approval of Kogan to ban any customer committing a ‘serious breach’ of ispONE’s acceptable use policy.

A 'serious breach' was defined as more than 1000 texts, 600 MMS or 12 hours of calls in one day.

Kogan Mobile's filing claimed the company held ongoing discussions with ispONE on how it might provide checks and balances on the wholesale telco's policy enforcement, but the two could not agree on terms.

Kogan Mobile claimed that even after forging a service suspension policy with ispONE in March, the wholesale telco flagged the accounts of 600 Mobile users, preventing them from recharging their services.

Kogan Mobile claimed ispONE confirmed as much, and later agreed to remove the flags.

In the same month, Kogan Mobile agreed to change its website terms to include a 400MB cap on data per day and a once-a-month only recharge option for new customers.

But by the end of the month, according to Kogan Mobile's affidavit, ispONE had flagged 2000 Mobile users. The retailer said the wholesale ISP agreed to remove the flags for 211 of the 2000 customers that had not yet moved to recharge their service.

Kogan claimed to have sent those 211 customers each a $50 voucher to the Kogan online store as compensation. The two went back to the negotiating table and - Kogan claimed - ispONE agreed not flag any more customers until the pair could agree on how to enforce the acceptable use policy.

By early April, the retailer accused its wholesale partner of flagging a further 1480 Kogan Mobile customers, restricting those customers from recharging their service, and suspending the service of 600 customers without first contacting Kogan, despite their agreed service suspension policy.

Kogan Mobile had 56,890 active customers at the time, according to the documents.

Kogan Mobile demanded ispONE immediately reactivate services to the suspended customers, contact them and apologise.

Kogan Mobile's staff managed to reactivate some of these services internally but were unable to unflag the 1480 customer accounts to allow those customers to recharge with new credit.

SIM cards

Part of the agreement between the two parties involves a monthly order of 50,000 micro SIM cards. Kogan said this week it was still awaiting its April order of 50,000 micro SIM cards and 15,000 nano SIM cards from ispONE, which were expected to arrive on April 10.

According to the documents, ispONE informed Kogan Mobile on April 4 it did not intend to provide the retailer with the SIM cards unless it renegotiated rates in the pair’s wholesale agreement. Kogan said it had processed 102,647 SIM cards since its December Mobile launch, and sells between 600 and 1000 per day.

The wholesale telco counter-accused Kogan of breaching part of its agreement by issuing a press release about the pair’s wholesale agreement, which breached a clause in their contract.

Kogan denied this claim.

Last week the retailer claimed to have discovered ispONE had suspended the services of a further 600 users flagged in March.

Kogan Mobile said it subsequently contacted the ISP, demanding it immediately reactivate the services, contact the customers and apologise to the users by the start of this week. The retailer said ispONE refused to comply to the request.

The online retailer filed legal action against ispONE in Victoria’s Supreme Court on April 9. This week it succeeded in winning an injunction against ispONE, suspending users until the pair go to trial next week.

Kogan claimed to have suffered significant brand damage as a result of ispONE’s ‘unilateral disconnection’ of customers services, and said it had received 19 complaints from the TIO.