Watchdog snaps at cost of calling mobiles

By PETER GRIFFIN

Good news for phone users may arrive on Monday, when the Commerce Commission is expected to recommend a cut in the price of calling a mobile phone from a landline.

After seven months of investigations the commission will issue a draft report likely to mirror moves by overseas regulators to lower "mobile termination rates" - what Telecom, Vodafone and TelstraClear charge one another to complete calls on their networks. Termination rates can make up 30 to 60 per cent of the per-minute cost of a call to a mobile, and contribute significantly to the revenues of Telecom and Vodafone, which this month reported a record $154 million annual profit.

A stack of research reports show New Zealand's mobile phone rates are high by international standards.

An August 2002 report from the OECD and Teligen puts New Zealand mobile prices among the highest in the world - up with those of Poland, Mexico and the Slovak Republic.

In June the Australian Competition & Consumer Commission said mobile termination rates should fall from A21c per minute to A12c by January 2007. But the regulation has sparked outrage from mobile operators such as Optus.

Fans and foes of regulation here agree that any reductions in the amount telecommunications operators charge each other has to put a dent in the price the consumer pays.

Ernie Newman, the chief executive of the Telecommunications Users Association, expects mobile termination rates to be "cut by half, give or take ten per cent".

But whether that was passed on in the form of cheaper retail prices depended on a measure of "good faith" among phone companies.

The commission will not regulate retail pricing, but says in reports that it is confident price cuts will trickle to phone users. The commission is also looking at mobile-to-mobile pricing, but for consumers fixed-to-mobile pricing is the bugbear.

Economist Dr John Small, who advises Vodafone, was less certain that termination rates would be cut and was wary of a repeat of the Australian situation where retail pricing was not guaranteed to fall despite cuts in termination rates.

"If that happens, you're taking money out of the pockets of mobile network operators and putting it in the pockets of operators passing calls to mobile networks," said Dr Small.

In other words, the economics of Telecom's business would improve but consumers would not see cheaper fixed-to-mobile calls.

From each call made to a mobile network, about 27c a minute goes to either Vodafone or Telecom, whoever receives the call. That price has dropped by about 30 per cent over the past few years, but retail prices have been much slower to fall.

Sydney-based telecoms commentator Paul Budde said New Zealand was "one of the most expensive countries when it comes to fixed-to-mobile charges," and that the "mobile duopoly" of Telecom and Vodafone needed more scrutiny.

Mobile charges

* Telecom: 49c a minute (off-peak), 99c (peak), or 71c (anytime) to call a mobile from a residential fixed line.

* TelstraClear: 45c a minute (off-peak), 85c (peak), or 71c (anytime) to call a mobile from a residential fixed line.

* Smaller operators such as Slingshot and WorldxChange offer cheaper package deals from 42c a minute.