‘Amy’ says possible telco price deregulation would drive her ‘dumb phone’ parents to tears

Technology and market conditions have changed since mobile termination rates first came on to the Commerce Commission's radar as 2degrees fought for traction in the 2000s, Telecommunications Commissioner Tristan Gilbertson argues.

A submitter known only as “Amy” has schooled the Commerce Commission on a regulatory change that could, she says, cause her parents grief.

The commission said earlier this week that it is assessing whether to deregulate mobile termination access service (MTAS) rates – or the wholesale charges mobile phone companies charge for terminating calls or texts from other fixed or mobile networks (which may or may not be passed on to customers).

Shortly after 2degrees launched, it complained that Telecom and Vodafone had cheaper rates for calling people on their own networks, making it harder for the newcomer to attract customers.

The market watchdog waved its big stick, helping to create a more level playing field – and an environment where most of us are on plans with unlimited texts and local calls.

Every five years, the regulator reassesses whether it needs to stick its nose into MTAS. The rates aren’t directly regulated, but the option is in the commission’s toolbox.

It’s weighing whether to discard it (or, in more formal terms, mention of MTAS would be scrubbed from Schedule 1 of the Telecommunications Act)

If MTAS becomes a free-for-all again, could it mean a return to pay-per-text for most of us?

“That’s the real risk. At the moment, we rely on an industry commitment with a threat of regulation and this move would remove that threat,” Telecommunications Users Association of NZ (Tuanz) head Craig Young told the Herald.

The commission says the technology landscape has changed.

Telecommunications Commissioner Tristan Gilbertson said MTAS might no longer be necessary to promote competition, given you can now message or call via the likes of Facebook Messenger and WhatsApp (all of which are covered by your data plan).

Enter someone known as “Amy”, the only member of the public to submit a response to the Commerce Commission’s draft decision. She was unimpressed by the market watchdog’s “just use the apps” logic. She wrote:

My parents (in their mid-70s) and many of their friends have “dumb phones” that only handle SMS messages and phone calls, and which are very important to their sense of safety and security in travelling outside the home.

These phones generally don’t use data, and I suspect many of their owners could not cope with a shift to a smartphone and data-based messaging services. By way of anecdote, I’ve tried to get my mum, who is a bit more technically confident than my dad, to shift to an elderly-friendly smartphone; I took her through it multiple times and wrote her explainers.

But after she ended up bewildered and in tears multiple times, I came to accept it wasn’t going to work.

I would be worried about any deregulatory change that enabled their mobile service provider to increase its charges for consumers like them, as such consumers will probably be unwilling or unable to change their mobile service provider in the face of price increases.

Yet the rise of Apple Messages, WhatsApp et al does mean the price of a text message is no longer much of a competitive lever.

And, in 2degrees’ view, Gilbertson also has a point when he says market conditions have changed.

Back in the 2000s, 2degrees founder Tex Edwards used to complain about the larger Telecom and Vodafone using the “network effect” (or cheaper rates for calls and texts to their own, much larger customer bases) to keep a boot on his neck.

But the telco’s most recent MTAS submission, dated November 2024, paints a picture of a more level playing field.

“While 2degrees considers mobile termination rates regulation was critical to competition when it was introduced – in particular, including with the prevalence of on-net pricing foreclosing competition from new entrants – we agree with the commission that market conditions have changed since then, meaning that the relevance of regulated MTAS should be reviewed,” 2degrees head of regulatory policy Sara Lipanovic wrote.

“The retail mobile market is now much less concentrated with 2degrees having entered and now acquired around 21% market share and continuing to challenge for more.”

And notwithstanding Amy’s parents, 2degrees says “consumer demand is now focused on data rather than voice and SMS”, Lipanovic wrote.

She quoted 2degrees’ early submission that anecdotal evidence pointed to a big rise in the use of Facebook Messenger, Microsoft Teams and other apps.

“As the world continues to move towards OTT [over the top] applications and data, we expect MTAS regulation overall to be less relevant and increasingly yesterday’s problem,” Lipanovic said.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.