Cuts to wholesale mobile rates proposed

Photo / Thinkstock.

The wholesale price of texting and calling mobiles may soon be slashed to try to reduce the prices users pay.

A preliminary decision released by the Commerce Commission yesterday would cut mobile call termination rates from around 14c to 4.68c per minute if it is finalised.

Text message rates would be set at zero, down from 9c.

Termination rates are the fees telecommunication companies charge each other for the termination of a call or text message originating from a rival network.

So for every call a Vodafone customer makes to a Telecom mobile, Vodafone must pay Telecom a 14c-a-minute fee.

Telecommunications Commissioner Dr Ross Patterson said present rates were an obstacle to small companies wanting to enter the industry.

"The removal of this barrier will promote vigorous competition for the long-term benefit of consumers."

The Telecommunications Users Association of New Zealand said that once the rates were reduced, companies should pass on the saving to consumers.

"We'd like to see the price of calling a mobile drop by 9c or 10c per minute right across the board," said association chairman Pat O'Connell.

However, Vodafone's head of public policy, Hayden Glass, said it was not a simple job of passing the 10c reduction to customers.

Although companies would be paying less for calls to other networks, Mr Glass said they would also miss out on charging rival networks for calls to their own.

He said the industry would have to wait and see the effect of the proposed changes.

A spokesman for Telecom would not comment on whether the changes would bring prices down.

But 2degrees chief executive Eric Hertz said the plan would reduce prices as more operators would be able to compete with bigger companies.

"It will help new entrants into the market like us because it lowers the barriers," Mr Hertz said.

"This allows the whole market to be more competitive and I think it's the additional competition that brings lower pricing for everyone."

The commission is taking submissions on the proposal and will release its decision in March 2011.

The figures:

14 cents current cross-network fee per call

4.68 cents proposed rate

9 cents current cross-network fee per text

0 cents proposed rate