KEY POINTS:
Vodafone has stopped building its new mobile network, because it says proposed regulation of the mobile market goes too far, and will not resume until the extent of regulation is clearer.
Responding to the Commerce Commission's plan to regulate mobile roaming - the ability to use a competitor's network in order to get national coverage - Vodafone said the proposals would have a serious negative impact on the business case for its planned network build.
In a draft recommendation last month, the commission recommended regulating the prices charged to roam on competitors' networks.
A commission review of the mobile market last year found significant barriers to a third mobile player entering the market was reducing competition in New Zealand.
Vodafone's general manager of corporate affairs, Tom Chignell, said it had already built a new 3G network capable of providing high-speed mobile broadband out to 60 per cent of New Zealand's population, but further plans were on hold.
He said reaching the remaining population was becoming increasingly expensive. "We're probably not halfway there in terms of the capital needed to roll out the networks."
The commission had proposed market entrants be able to access new network technologies, including 3G, WiFi and WiMAX, in addition to the existing 2G network.
In its feedback to the commission's proposal, Vodafone said restricting roaming to its current 2G network would encourage new players to invest in their own networks.
"The commission is seriously misjudging the real effect on investment of requiring us to make 3G and all other new technologies available to roaming competitors immediately," Vodafone said.
Chignell said the other disincentive to investment in wider network coverage was the telecommunications service obligation (TSO) costs - the subsidy phone companies pay Telecom to provide free local calling - which had got "a bit out of hand" over the last two or three years.
He said Vodafone paid 20 per cent more to cover the 2004/2005 year than the previous year.
"The reality is over the five years it looks like the TSO liability for Vodafone is going to be increasing by an average of 15 per cent per year," said Chignell. "This is just crazy. We're ending up over the period since it started giving Telecom $116 million in TSO payments."
Chignell said Vodafone would rather the commission left it to make commercial agreements with other telcos rather than regulate the mobile market.
"We've shown everybody we're able to do these commercial agreements so we don't think it's necessary to push regulation any further."
However, both TelstraClear and CallPlus' comments to the Commerce Commission highlight difficulties in nailing down commercial agreements with Vodafone.
This year TelstraClear abandoned plans for a third mobile network, blaming Vodafone for last-minute changes to a roaming agreement - a claim Vodafone denied.
"TelstraClear's experience negotiating access, to facilitate our own cellular investment, highlights the difficulty of achieving reasonable commercial outcomes in the absence of appropriate regulation," TelstraClear said in its submission.
GAME PLAN
* Vodafone wants the Government to accept its commercial undertaking rather than regulate the mobile market.
* It has halted work on its new 3G because regulation would remove the incentives for investment.
* Wants roaming prices set at a level which encourages new mobile players to build their own networks.
* Wants the required network build by new entrants to extend beyond the 10 per cent of the population proposed by the Commerce Commission.
PHONES RING HOT WITH DEALS
The rush of phone deals continues with Telecom trying to hold on to customers by offering "free" mobile calling to anyone signing up to its landline and toll calling package.
Telecom head of consumer propositions, Adrian Littlewood, said customers who take a Telecom landline with its "Talk it Up" toll package would get free mobile calling, provided they signed up for a year.
Telecom's competitors Vodafone and Orcon have both recently announced deals aimed at attracting new customers, tying them to 12-month contracts in exchange for free broadband.
IDC analyst Tim Shepheard said Telecom was attempting to retain existing customers through bundling its own services to match competitors.
"With the economics of local loop unbundling looking positive for access seekers and real margins likely, the land grab for customers has heated with most players offering aggressive pricing and bundled services," he said.
However, Shepheard notes all the offerings tie consumers into contracts.
"The use of contract periods is certainly not restricted to New Zealand, as seen in Australia virtually all price lead competitive offerings come with a 24-month contract," said Shepheard.
Shepheard said consumers needed to realise the free calling only applied to the minimum monthly credit under the relevant plan.
