Regulator takes swipe at mobile termination rates

Steven Joyce will be the one making the big decisions. Photo / Doug Sherring

The Commerce Commission says the price phone companies charge rivals to access their mobile networks should be regulated because it is "significantly above cost".

The commission yesterday released its draft report into mobile termination prices - the wholesale costs mobile phone companies charge for receiving calls or text messages from other landlines or mobile networks.

It has recommended regulation of the wholesale rates rather than consumer rates.

Commissioner Anita Mazzoleni said consumers would benefit from an increase in competition if wholesale rates were lower while making it easier for a new mobile player to enter the market.

"Overall, the commission has estimated the retail cost of calling a mobile from a fixed line could be significantly lower as a result of regulation.

"Additionally the commission also expects there would be benefits to consumers in the mobile market as a result of moving to wholesale charges that are cost-based," she said.

The commission wants rates to drop to 7.2c per minute for mobile calls and 0.95c per text message this year and then drop further to 3.8c per minute for calls and 0.5c per text by 2015.

Those rates are well below the current wholesale rate of 15c per minute and are also below gradual price reductions offered by Vodafone and Telecom as part of the consultation.

The regulation recommendation received a mixed reaction from telcos.

Vodafone spokesman Paul Brislen said it was disappointed the commission had decided to go down the regulation route.

Telecom chief executive Paul Reynolds said the decision was not unexpected.

Reynolds said mobile prices in New Zealand had declined in recent years and it remained committed to the mobile termination rate deed it signed with the previous Government.

But the recommendation was welcomed as a step in the right direction by new mobile network player 2degrees, which is hoping to launch in August.

2degrees chief commercial officer Bill McCabe said New Zealanders suffered some of the highest mobile prices in the world as a result of high mobile termination rates and lack of competition. "The commission's report recognises these issues."

But he warned of a potential lengthy delay in the introduction of the rate changes unless support was gained from the major industry players.

"The way the process works it looks like it will be 2011 at the earliest before there will be any changes in the market unless we get sensible undertakings from all players."

Ernie Newman, chief executive of the Telecommunications Users Association, said the recommendation was good news but it was also predictable. "We have been there before."

Newman said the key now was the speed in getting the changes introduced and a show of support from Government that it would go ahead.

The Commerce Commission can make recommendations but it is Communications Minister Steven Joyce who will decide whether to go ahead.

Newman said proposed changes for the rates had already been pushed out by 18 months after the previous Government chose not to go with recommendations by the Commerce Commission and brokered a deal directly with Telecom and Vodafone. Interested parties have until July 27 to give feedback on the recommendation with a final recommendation expected to go the minister by the end of the year.

Meanwhile the commission yesterday said it would also investigate whether regulation of the national mobile roaming service should be extended to include price.

COST CUTS

Proposed reductions in wholesale termination rates for calls
(per minute).

* Vodafone:Drop from 15c to 11c by 2014
* Telecom: Drop from 15c to 10c by 2013
* Commerce Commission's benchmark rates: Drop from 7.2c to 3.8c by 2015