Regulate telcos or users will suffer, say lobbyists

Mobile phone customers will end up paying the price if the telecommunications industry is not regulated, an industry lobby group says.

The Commerce Commission yesterday released a report for Communications and Information Technology Minister Steven Joyce to consider, which recommends that he accept offers made by Vodafone and Telecom to reduce the fees they charge each other and newcomer 2degrees for receiving text messages and phonecalls.

The fees, known as termination rates, form part of the costs users are charged when they pay for phonecalls and text messages to opposing networks.

The fees will fall by more than half by 2014 if the recommendations are adopted.

Both Telecom and Vodafone say termination fees do not define what customers are charged, but they are a contributing factor to fees.

After six years of consultation, even the three commissioners considering the complex subject do not agree.

In the report, Telecommunications Commissioner Dr Ross Patterson recommends the industry regulate itself voluntarily.

Associate commissioner Gowan Pickering agreed but commissioner Anita Mazzoleni was in favour of regulation.

Their report will be considered by Mr Joyce, who is calling for submissions on the topic by March 8.

Consumer NZ chief executive Sue Chetwin said it was disappointing that two of the commissioners had backtracked from their views that termination fees were too high.

"I don't think they're coming down far enough or fast enough ... [but] it's not the end of the game yet."

Sharing her view was Ernie Newman, chief executive of the Telecommunications Users Association of New Zealand (TUANZ), who said the recommendations were "anti-competitive".

"It very much favours the big established operators and is hugely detrimental to any small player or new entrant," he said.

"If the minister accepts these recommendations then long term it's a bad outcome for consumers.

"It's certainly a major deterrent for anyone entering the market against Vodafone and Telecom. At the end of the day, customers will lose because new entrants will be closed out of the industry."

Mr Newman said he would be making a submission to the minister, whom he urged to "keep an open mind and read commissioner Mazzoleni's dissenting opinion very, very carefully".

2degrees is also making a submission on the report, which it said was disappointing and would make it hard for the company to reduce its prices. Both Vodafone and Telecom welcomed the report.

In August, a combined effort from groups including 2degrees and Federated Farmers resulted in the instigation of a Drop the Rate, Mate! campaign, fighting for lower termination rates.

Campaign spokesman Matthew Hooton said yesterday: "Almost all other countries' competition authorities understand that high mobile termination rates have no justification and are simply barriers to competition, and we will be working to ensure Mr Joyce accepts that point too."

THE BACKGROUND

* Termination rates are the fees a network charges when another network calls or sends a text message to its customers.

* The Commerce Commission looked into whether the networks needed to be regulated because it said termination rates are "significantly above cost" in New Zealand, at 15c per minute for phonecalls and 10c per text.

* The commission released its final report yesterday. This recommends not regulating the industry, preferring less "intrusive" means of managing the termination fees by having Telecom and Vodafone agree to new, cheaper rates.

* If this is accepted, termination fees would gradually reduce to 6c a minute for voice calls by January 2014 and costs of between 0 and 4c per text message from October this year.

* Communications and Information Technology Minister Steven Joyce is calling for submissions on the commission's report by March 8.

For more information, visit: www.med.govt.nz/mtas