Regulate mobile rates - Commerce Commission tells minister

Communications Minister Steven Joyce has been advised by the Commerce Commission to regulate mobile termination rates. Photo / Brett Phibbs

The Commerce Commission has formally recommended that mobile termination rates be regulated to promote better competition in the market and to bring New Zealand in line with international standards.

In February, the Commission released a draft report recommending the Government accept undertakings from Telecom and Vodafone as an alternative to regulation.

But it reversed that recommendation in a subsequent draft report, citing Vodafone's highly competitive on-network prepay Talk plan.

The plan, which was pulled from the market just days after the draft recommendation was made, offered prepay customers 200 minutes of landline and mobile calls to other Vodafone mobiles for $12 per month.

In its official report released today the Commission recommended the
termination of voice calls and text messages on New Zealand's mobile networks be regulated by Communications and Information Technology Minister Steven Joyce.

Responding to the news this morning, Vodafone said it was "of course disappointed with the Commission's reconsideration report."

"Undertakings have been part of the Telco Act since 2006 but the Commission has yet to accept any commercial offers from the industry.

The undertakings generate lower termination rates sooner than regulation, with price cuts from October this year rather than at the end of yet another long period of debate," it said.

"2degrees is not having any trouble competing, so the Commission's efforts to protect it, whilst theoretically elegant are completely unnecessary from a practical point of view," said Vodafone.

"The difference between the regulated rate and the undertakings is likely to be minimal at best - perhaps two or three cents per minute better for voice and almost no difference for TXT."

The release asked "Is it worth delaying the introduction of these rates for another year while the Commission decides on its theoretical model?"

2degrees chief operating officer Bill McCabe welcomed the recommendation but said there was still plenty of opportunity for Vodafone to stall the process while the Minister considered the Commission's recommendation.

"We're hoping for a quick decision and a fast process that allows 2degrees to put even better prices in the market," he said.

Vodafone said it would continue to make the case for company undertakings rather than regulation, since they offered " better value, sooner".

"The Minister will have to consider whether now is the right time to further expand regulation without a solid basis for intervention," it said.

The Commerce Commission this morning reiterated that undertakings from Telelcom and Vodafone did not address competition concerns.

While a plan like Vodafone's Talk Add-on might provide short term benefits to consumers on larger networks, such plans were likely to be detrimental to competition in the mobile services market in the long-term, the Commission said.

The plan introduced a low on-net tariff to a broad customer base of a large existing network, the Commission said.

Faced with such plans, a small entrant paying the wholesale mobile termination rates contained in the undertakings would likely incur significant losses and therefore be unable to compete against the large networks, said Telecommunications commissioner Ross Patterson said.

The Commission has been concerned mobile termination rates - the fee telcos charge each other to receive calls and texts from competitors' networks - are higher in New Zealand than other countries and may be inhibiting the entry of new mobile players.

"The Commission considers that cost-based mobile termination rates, when compared to the offers in the undertakings, will promote competition in the mobile market and will be in the best long-term interests of end-users," said Patterson.

"In the long-term the Commission expects that its recommendation of regulation will ensure that all mobile users will benefit from great competition, which is expected to result in access to more competitive prices and services."

Joyce is now inviting submissions on the Commerce Commission's reconsidered final report.

Submissions close at 5pm June 29.

Under the Telecommunications Act, the Minister may accept, reject, or require the Commerce Commission to reconsider the recommendations.

"I will make a decision upon consideration of the report, submissions, and advice from officials. It is my intention to do this in a timely manner," Joyce said.