Critics: Telcos' agreement puts mobile rates among world's highest

New Zealand's two largest telcos are facing accusations that a pricing agreement between them is a "cash cow" that hikes costs to consumers.

The deal covers mobile termination rates (MTRs), the fees phone companies charge rivals to use their networks.

Critics claim the rates agreed by Telecom and Vodafone are among the highest in the world.

A draft report on the subject by the Commerce Commission is due to be released tomorrow.

While the commission has refused to reveal details in advance, the Telecommunication Users Association of New Zealand said MTRs added hundreds of dollars to mobile bills every year.

Chief executive Ernie Newman said they were on top of the retail rate - the cost of connecting the call - meaning customers are effectively charged twice.

He described the practice as an industry slush fund: "It keeps these prices much higher than they need to be."

Newman wants the draft report to propose regulating the charges, which he says should be lower than the voluntary reductions proposed by Telecom and Vodafone in March.

Telecom spokesman Mark Watts and Vodafone counterpart Paul Brislen both said MTRs were only one factor in determining the cost of mobile calls.

"It isn't the only factor and focusing yet again on MTRs as if they're some magic bullet seems like a bad joke that's gone on and on and on," said Brislen.

Both companies said the cost of mobile calls had dropped an average 18 per cent a year in each of the past three years.

New network 2degrees has yet to launch, but is already claiming Telecom and Vodafone's MTRs are blocking cheaper calls. 2degrees says MTRs for calls are six to eight times the cost of providing the connection and for texts 100 to1000 times the cost.

The Commerce Commission has been pushing for regulation and started its latest investigation last November.

In March, Vodafone proposed MTRs starting at 15 cents a minute for calls, reducing to 11c by 2015, and 9.5c for text messages, reducing to 7c.

Telecom offered rates starting at 16 cents a minute for calls, reducing to 10c by 2015, and a flat rate of 3.5c a text.

The commission argues rates could be as low as 7 cents a minute for calls and 1c for texts and asked Telecom and Vodafone to submit proposals last month.

The commission's final report is to be delivered in December.