Telecom offers to slash mobile termination rates

Telecom has offered to slash by 53pc the fees it charges other telcos for calls ending on its network.

Telecom is offering to cut its mobile termination rates by 53 per cent during the next five years in a bid to head off price regulation.

Mobile termination prices are the wholesale charges mobile phone companies charge for terminating calls or texts from other fixed or mobile networks.

In a draft report released a month ago, the Commerce Commission recommended mobile termination prices should be regulated, and that undertakings submitted in lieu of regulation by Vodafone, Telecom and 2degrees should be rejected.

In a revised undertaking submitted to the commission yesterday, Telecom offered to cut mobile termination rates from 15 cents per minute now to 7cpm by 2015.

And in its submission on the draft report, Telecom said the mobile sector in this country was characterised by high levels of investment, world-leading technology and networks, product and service innovation, and recently, new entry.

"In the most challenging economic times of our generation, the mobile sector is a standout success."

Mobile termination rates, mobile retail prices and fixed to mobile retail prices were all declining rapidly while usage volumes were increasing - all without regulatory intervention.

Mobile termination rates had fallen by more than 46 per cent in the past five years, Telecom said.

In that context, including Telecom's revised undertakings, "it is difficult to understand how any case for regulation can now be made".

Telecom said its revised undertaking was based on the current regulated mobile termination rate set in Australia by regulator the ACCC.

In its submission, Vodafone said it would make the interconnect agreement between it and company 2degrees available to any new entrant on the same pricing and terms.

"We would like to be able to announce what these terms are but are prevented from doing so by 2degrees which has denied all our requests to make public what is clearly a matter of public interest," Vodafone said.

"Nevertheless, Vodafone firmly believes that the agreement is structured in such a way as to give any new entrant to the market a significant leg up and that the proof is clear in 2degrees' imminent launch."

The commission had expressed concerns the agreement was not available to all access seekers, Vodafone said.

Vodafone also warned that with lower mobile termination rates, operators would find low spending customers less attractive, and some may not be attractive at all.

"This is because a significant portion of their 'value' to an operator is in the incoming calls they receive and therefore the incoming revenue they generate."

In the United States, where termination rates were particularly low, operators deterred low spending customers by adopting minimum monthly spend limits. For example, AT&T required US$25 ($38.50) top ups to be used within 30 days or the residual amounts were lost.

That level of monthly commitment in this country would exclude most of the country's prepay customers who, on average, spent far less, and the social benefits of mobile telephony would be lost to them, Vodafone said.

Vodafone argued that the commission's estimate of the actual cost of providing mobile termination services in this country was nearly half the rate which should be used.

The cost estimate was based on benchmarking against overseas countries, but that benchmarking was inaccurate and unreliable.

- NZPA