Two-phone solution to mobile duopoly

By Simon Hendery

If you lined up 100 New Zealanders, then emptied their pockets and purses, you'd retrieve 108 mobile phones.

The fact that there are more active cellphones than people in this country is not a sign that we're a nation obsessed with mobile communication technology.

It's evidence that we're a canny bunch prepared to juggle dual mobile accounts from Telecom and Vodafone in order to take advantage of the best calling deals.

The 108 per cent "penetration rate" figure - outlined in the Commerce Commission's 2008 telecommunications market monitoring report, released this week - shows that consumers are still being overcharged by the mobile network duopoly.

The ludicrous solution to the problem of high calling costs, for those who can be bothered, is to carry around two phones, one for calling Vodafone numbers and the other for calling users of Telecom's network.

At the heart of the issue are mobile termination rates - the fees the competing telcos charge each other for passing on calls made to the other's network, currently 15c per minute.

Telecom and Vodafone have proposed reducing termination rates gradually between now and 2014 to 10c and 11c respectively.

The Commerce Commission is in the midst of an investigation into the rates, but said last month its preliminary view was that the proposed cuts did not go far enough.

The Telecommunications Users Association (Tuanz) agreed, saying someone making 10 minutes of calls to mobiles a day was currently paying $300 a year in excess charges, and would pay a total of $1300 in excess charges by the time the rates fell to the proposed 2014 levels.

The commission is due to make a recommendation for addressing the termination rate issue to Communications and Information Technology Minister Steven Joyce in December.

Tuanz chief executive Ernie Newman said this week the Commission's latest market report showed that mobile termination charges "increasingly stand out as the main piece of unfinished business in telecommunications policy".

"These charges are so far above actual costs that they have allowed the two mobile operators to ring-fence their networks and charge a major penalty to people who want to call their network's customers from another network's phone."

The ring-fencing Newman is talking about is the telcos' monthly plans that give users free, or much cheaper, calling and text messaging to users of their own networks.

"When thousands of people have to carry two phones and pay two accounts to avoid artificial price penalties, it is high time for the commission to act," he said.

"Such a cost impost has no place in an open market and should not be there in the first place. It costs large business users, as well as personal users, very dearly and the costs flow right through the economy."

Also keen for the commission to move on this issue sooner rather than later is NZ Communications, which has been building the country's third mobile network and plans to launch into the market later this year.

High termination rates are a particular obstacle for the newcomer because its small customer base at launch time will mean most of its calls will head out to the other networks, incurring termination charges.

Last week NZ Communications vented its frustration at a commission decision to extend the timetable for its termination investigation.

Meanwhile, the commission's market monitoring report paints a much rosier picture of New Zealand's standing on the OECD league table for mobile plan pricing than in previous years.

A comparison of "baskets" of mobile plans has us paying 84 per cent of the OECD, down from 127 per cent a year ago. The change is due to the commission agreeing to include Vodafone's cheapest on-account plan in the data.

Newman, however, said benchmarking plans across countries was an exercise fraught with difficulty.

"But the fact that New Zealanders use their mobiles less than people in most other countries again underlines the market failure in relation to the termination rates, and the need for a third mobile network to break the duopoly effect on pricing."

- NZ Herald

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