Hamish Fletcher: Prices won't fall immediately, but the game is changing

Photo / Thinkstock

After seven years of debate, the Commerce Commission has finally driven a stake into the heart of mobile termination rates.

The beast certainly didn't go down without a fight, and cheerleaders Telecom and Vodafone fought tooth and nail for nearly a decade to stave off regulation and keep it alive.

The pair almost got their wish; early last year the commission recommended Communications Minister Steven Joyce accept a proposal from the two to gradually reduce their rates over time.

But after an aggressively priced on-net deal from Vodafone, the chances of a voluntary accord slipped away. Vodafone made its bed; now it must lie in it - and share it with Telecom and 2degrees.

Out of the Big Three mobile companies, Vodafone has been the most ardent campaigner against rate cuts since the spectre of regulation threatened in 2004.

The company has consistently said cuts would damage the industry and by no means guarantee a drop in the price consumers pay to make calls.

Indeed, it appears MTR cuts may not be the silver bullet to prices that consumers were praying for. Vodafone, Telecom and 2degrees have all indicated that retail calling prices will not fall as a direct result of cuts to termination rates.

There is also nothing in the commission's 358-page ruling that requires telcos to pass the cuts on to consumers.

But while prices may not reduce in the short term, the public can take comfort in the fact that yesterday's decision is likely to increase competition in the mobile market.

This is because the practice of telcos charging low prices for on-net calls (those between customers on the same network) and high prices for off-net calls (and those that incur termination fees) will come under close scrutiny from the commission.

The regulatory body stopped short of banning on-net deals (like BestMate), but said it would monitor and report on the difference between on-net and off-net rates and may push through further regulation.

If the gap between on-net and off-net prices fall, a telco can no longer rely on its high customer base to attract and keep customers.

It forces them to offer better deals than their competitors and, theoretically, on this more even playing field, the high prices New Zealanders pay for mobile use will fall.