Telecom rebuffs mobile cost cut

By PAUL BRISLEN

Telecom says it may not reduce the cost of mobile phone calls despite proposed price controls that could cut the cost to users by 12c a minute.

Phone users could save up to $217 million over five years if the Commerce Commission introduces the controls in a bid to bring the price of mobile phone calls in line with international standards.

But the commission will not force phone companies to pass on the charges, although it says it expects this to happen.

New Zealand mobile phone calls are among the most expensive in the world - on a par with Poland, Mexico and the Slovak Republic, OECD figures show.

Telecom and Vodafone charge other phone companies an average of 28c a minute to call their customers.

The commission says this "termination charge" should be 16c a minute.

Telecom and Vodafone claim the commission is regulating the wrong part of the industry and that the mobile phone market is competitive.

Vodafone says it has reduced its termination rates by 30 per cent over the past five years.

But finance director David Sullivan said those savings had not been passed on to consumers.

"We don't control the rates consumers pay to call mobiles from their home phones.

"We're going to be asking the commission why it thinks regulating this one part of the market will reduce prices for consumers, which is what the commission is supposedly all about."

Telecom says it may not pass on the saving to consumers at all.

Its general manager for government relations, Bruce Parkes, said the report assumed consumers would benefit from the savings.

But that was not necessarily the case.

"You can't make an automatic assumption that [savings] would be passed through. We would expect that a competitive calling market would determine how prices in the retail market change over time."

TelstraClear's manager of regulatory affairs, Grant Forsyth, welcomed the commission's draft report.

"We would certainly pass on savings to our customers and welcome the opportunity to do so."

The Commerce Commission's network access group manager, Osmond Borthwick, said the commission was assuming any savings would be passed on.

It had not regulated that this happen, but he expected "a substantial reduction" in mobile phone charges.

Dean Kallawk, managing director of new cut-price phone call operator Banana Communications, said any reduction in termination rates would enable his company to put more money into marketing.

The Telecommunications Users Association, which asked the commission to look into mobile termination rates, also expects companies to pass on savings, said chief executive Ernie Newman.

"If they don't, it will be a challenge not only to the regulator but also to the Government and to the community."

The commission will hold a conference on the issue in December and issue a final report early next year.