Move to rein in mobile call cost pleases no one

The Commerce Commission's long-awaited recommendation on how to lower the cost of calling mobile phones has met disappointment from users and providers alike.

Communications Minister David Cunliffe yesterday released the commission's report, which recommends that mobile termination rates should be regulated.

Termination rates are the fees that mobile operators - Telecom and Vodafone - charge fixed phone service operators, such as Telecom and TelstraClear, to end calls on the mobile networks.

But the report does not specify what the rates should be and is vague on exactly what savings for customers would result. Savings for consumers, if any, could still be months away.

The report says regulation could save phone customers $46 million to $63 million spread over five years.

Telecommunications Users Association chief executive Ernie Newman said the report's lack of decisiveness was disappointing. "Here is another granny step along the road to progress," he said. "Essentially, it's the same old stuff coming through."

Cunliffe said he would take submissions on issues not previously raised until May 22. A spokesman for the minister said the Ministry of Economic Development would have to analyse the submissions so it was difficult to predict when a final decision on the report would be made.

The report was the commission's second attempt at a final recommendation. Cunliffe sent the first back for reconsideration last August and asked the commission to evaluate commercial offers made by Telecom and Vodafone. Cunliffe also wanted the commission to revisit its opinion that newer third-generation (3G) phones should be not be included.

In its reconsideration, the commission rejected the commercial offers and accepted that 3G phones should be included in any regulation.

If the minister does enact the recommendation, the Telecommunications Act will have to be amended to include it. Fixed network owners and toll call providers, such as TelstraClear and CallPlus, will then be able to one-by-one seek a determination from the commission to set a termination rate, which could take months.

Newman said the good news was that the commission - in its two-year investigation process - had already done the work on what the rates should be.

In international benchmarking, it found the rate should be about 15c a minute. Telecom says its present fixed-to-mobile call rate is 22c a minute.

TelstraClear chief executive Allan Freeth welcomed the report, saying if the recommendation was passed, his company would seek a determination once its existing contracts with Telecom and Vodafone lapsed. A TelstraClear spokesman declined to say when that might be.

Vodafone and Telecom objected to the report. Vodafone said there was still no regulated enforcement of savings from lower termination rates being passed on to customers, and that fixed operators could not be counted on to do so.

Telecom said the commission had failed to show the country would be better off with lower rates. Bruce Parkes, Telecom's general manager of regulatory affairs, said the commission's own analysis showed a net benefit to the economy of between plus $5 million and minus $5 million.

"It fails the public benefit test. That's a pretty poor advertisement for regulatory intervention."

The benefits

* Saving to phone customers: $46 million to $63 million, spread over five years.

* Net benefit to the economy: Between plus $5 million and minus $5 million over five years.