Blow for plan to regulate telcos

Mobile phone companies will take heart from an OECD report that backs their criticisms of the Commerce Commission's recommendation that the Government regulate phone rates.

The report, published this week, calls into question the commission's cost analysis and says it is "extremely difficult to quantify the detrimental effects" of regulating mobile prices.

The report also warns that regulation should be carefully designed so as to "minimise the potential uncertainties and distortions it could generate."

Vodafone and Telecom have both submitted criticisms of the recommendation to Communications Minister David Cunliffe.

Industry sources say those submissions, backed up now by the OECD report, are likely to push a decision on the recommendation by the minister back until after the election.

Cunliffe viewed the report differently. It reaffirmed that New Zealand has the highest mobile prices in the OECD and poor high-speed internet uptake and "broadly endorses" the Government's strategy in dealing with those issues.

He said he was also "not going to be losing any sleep" over the telcos' submissions, adding that he was taking a thorough look at the entire mobile price issue.

The commission's recommendation, put to the minister last month, suggested that the cost of calls from landlines to mobile phones - or "termination" rates - were too high, and should be lowered by regulation.

The recommendation also exempted new third-generation networks from this.

Vodafone last week filed papers with the High Court at Auckland, seeking a judicial review of the recommendation.

While the company refuses to comment on the filings, it has questioned the commission's cost analysis and claims the only real beneficiary of regulation will be Telecom, which would have no obligation to pass on lower costs to customers.