Vodafone looks to Telecom to beat regulation

Russell Stanners

Vodafone has made a last-ditch attempt to avoid Government regulation by proposing a new deal with Telecom on mobile termination rates, but it remains to be seen whether it will result in a lowering of fixed-line calls to mobiles.

Mobile termination rates are the wholesale fees mobile phone operators charge Telecom for calls made from Telecom landlines to the mobile phone operators' cellphones.

These rates have been the subject of Commerce Commission scrutiny over the past two years because users of Telecom's fixed-line network believed calls to mobiles were too high.

The commission has recommended that the Government regulate the mobile phone market.

Vodafone today announced a proposal to the Government that mobile termination rates would begin at 20c and fall to 14.4c by April 2010.

As of last month the rates were 22.5c, according to a study by Ernst & Young. By international standards, the Commerce Commission has found the rate should be about 15c a minute.

Vodafone's chief executive, Russell Stanners, said if the Government accepted the deal it would be able to ensure Telecom brought down its charges for calling mobile phones from fixed-lines.

Also, the industry would be able to deliver benefits to consumers up to a year earlier than under regulation.

Stanners said Vodafone could not get Telecom to guarantee to bring down its fixed line costs on paper because that would be price collusion.

But Telecom had indicated its willingness to consider passing on termination rate savings to the consumer if requested by the Government to do so, he said.

"So there is an opening for the Government to solve a problem, which is a key to getting real low prices for consumers which can't be solved through regulation."

Stanners said the Commerce Commission tried to guarantee that Telecom would bring down its retail prices, passing on all savings from lower termination rates "but backed off" and said in its report on mobile termination rates released in April that it expects it to happen.

"I'm not saying the minister should take it but he has a choice," said Stanners.

Telecom communications manager John Goulter said it would not say by how much its fixed-to-mobile rates would fall but said Telecom did expect to see prices coming down.

Telecommunications Users Association of New Zealand chief executive Ernie Newman said he was pleased to see some progress on an issue that had taken an "inordinately long amount of time to work through".

"But we will not comment until we have discussed it with other users, particularly how the rates will be passed on to consumers," he said.

The association first lobbied the Government to look into termination rates in 2000 on the basis that Vodafone's rates were extremely high compared with those in other countries.

A spokesman said Communications Minister David Cunliffe was waiting for advice from officials on the Commerce Commission's mobile termination report, and that Vodafone's announcement of a new commercial offer would be canvassed as part of that.

Cunliffe would make a decision after considering that advice, the report, and any other relevant information.