Commission calls for lower mobile termination charges

Telecommunications Commissioner Ross Patterson. Photo / Mark Mitchell

The Commerce Commission today released its preliminary draft regulations on mobile termination access services, calling for lower wholesale voice and text pricing to encourage competition in New Zealand's cellular market.

In a statement today, the commission recommended wholesale pricing for voice calls to a mobile network should be set at a cost-based benchmark, starting at a rate of 4.6 cents per minute.

For text it adopted a bill and keep, or zero charge, approach, citing the low cost of terminating texts and the balance in inter-carrier traffic. That means that telecommunications networks recover their costs only from their own customers rather than from their competitors.

Mobile termination rates are the fees telcos charge each other to terminate calls or texts originating from competitor networks, and amount to millions of dollars in cross billing each year.

Competition concerns were stirred by the ability of major operators to offer heavily discounted pricing options to their customers by stripping out the mobile termination fees, a pricing option not available to newcomers such as Two Degrees Mobile Ltd. which does not own an extensive network or foothold in the market.

"The Commission recognises that this represents a substantial immediate reduction in the termination rate for voice calls, but believes that this is justified because of the unique market conditions in New Zealand," said Telecommunications Commissioner Ross Patterson.

The move is "necessary to remove a significant, long-standing and growing barrier to efficient expansion by a small mobile network operator," he said. "The removal of this barrier will promote vigorous competition for the long-term benefit of consumers."

The draft regulations fly in the face of a voluntary reduction approach favoured by Telecom Corp. and Vodafone New Zealand Ltd., the country's two biggest mobile operators, who claim the market is already competitive and price regulation is unnecessary.

The commission said will now seek submissions and cross-submissions on the draft determinations, followed by a conference with interested parties before releasing a final determination in March 2011.