Try again on cell calls, says minister

Calls to mobile phones will not get cheaper any time soon as Communications Minister David Cunliffe yesterday sent the Commerce Commission back to the drawing board on termination fees.

Telecommunications Commissioner Douglas Webb in June recommended in a report to Cunliffe that termination rates - the price for a provider to end a call on a mobile network - should be lowered through regulation.

These rates are a major factor in the retail price of fixed-line to mobile calls, and are currently about 27c a minute. After comparing costs with other OECD countries, Webb concluded the likely cost should be about 15c.

Cunliffe yesterday agreed that the fees were too high, but said the commission needed to reconsider several key issues before he could pass regulation.

One of these is the distinction between second-generation (2G) and third-generation (3G) networks.

Webb's recommendation excluded 3G networks from regulation so that providers would not be discouraged from investing in the new technology. But he also said that Telecom's new 027 network did not qualify as true 3G, and thus should not be exempt. That angered Telecom, which argued that its network did qualify under internationally accepted standards.

"It wasn't just Telecom [that complained]," Cunliffe said, adding that independent technical advice he received told him 027 was indeed 3G. "I don't think anybody in the market ... was happy with the definition."

Also of concern was a complaint from Vodafone, which argued there was no guarantee that lowering the rates would result in savings for the consumer. The move would only benefit fixed-line providers, Vodafone said, who were under no obligation to pass savings on.

"That would, in my mind, be a completely unacceptable outcome," Cunliffe said. "I'd ask the commission to think about what enforcement mechanisms are available, particularly on pass-through."

Cunliffe also said that Vodafone and Telecom have put forward commercial offers to voluntarily reduce rates early, and he wants Webb to examine these. Part of Telecom's offer, Cunliffe said, was a commitment to pass on 100 per cent of a regulated rate cut.

Reaction to the move was mostly positive. Vodafone and Telecom were both pleased their complaints were heard, and the Telecommunications Users Association was also happy that some progress towards lowering rates was being made.

Chief executive Ernie Newman said. "Sometimes a commercial outcome negotiated, like this one, at the barrel of a regulatory gun can provide the best of both worlds."

TelstraClear also agreed with the move.