No 'big bang' on mobile rates says analyst

Mobile calls may not get cheaper immediately as a result of the Govt's decision to regulate, says one industry commentator. Photo / Thinkstock

Cellphone users have been warned there will be no "big bang" from this morning's Government announcement that it will regulate mobile phone rates.

Telecommunications analyst Rosalie Nelson says many factors were built into what consumers paid and slashing termination rates would not automatically mean cheaper voice calls.

"The key thing about the regulation of mobile termination rates is that it brings us more into line with what happens internationally and promotes better competition.

"It is very naïve to think a wholesale rate is all that goes into what consumers pay," she said.

Mobile termination rates are the wholesale prices charged by a mobile network operator (such as Telecom, Vodafone and 2degrees) for providing services to customers from other network operators.

The decision completes the Commerce Commission's u-turn on mobile termination after Joyce questioned their original recommendation not to regulate after a Vodafone NZ pricing plan raised the hackles of some officials.

Nelson said while today's announcement would not automatically mean cheaper calling, it would give new players like 2degrees more room and more margin to come in with disruptive pricing plans.

Vodafone says it is disappointed the minister choose to regulate, rather than accept an industry solution, while rival 2degrees has welcomed the announcement.

"Vodafone sees no evidence that there will be material benefits to mobile or fixed-line customers from regulating mobile termination rates," Vodafone general manager of Corporate Affairs, Tom Chignell, said.

"The New Zealand mobile telecommunications market is dynamic and active, and to further regulate at this point would only interfere in what is proving to be the most competitive part of the overall telco sector," he said.

2degrees chief executive Eric Hertz said the move gave the telco increased confidence as it planned further network investment.

Hertz said he was hopeful the decision would be followed by a fast "standard terms determination process".

Telecommunications users lobby TUANZ says the move is a good one, but has come years too late.

"It's seven years since TUANZ asked the government of the day to join with other countries in regulating these anti-competitive charges.

"Over that time New Zealand mobile phone users, both personal and business, have paid hundreds of millions of dollars of excess charges to the mobile networks, as well as seeing competition in the mobile phone market restricted by these anti-competitive tariffs imposed by the market leaders Vodafone and Telecom," TUANZ chief executive Ernie Newman said.

TelstraClear regulatory group manager Chris Abbott said: "Since 2004, there has been protracted debate, obfuscation and delay, and all the while, ordinary Kiwis have had to pay the price.

"This issue should have been resolved many years ago."

TUANZ is calling on Vodafone and Telecom to pre-empt the regulation by immediately lifting surcharges on cross-network calling.

The Commerce Commission has been concerned mobile termination rates - the fees telcos charge each other to receive calls and texts from competitors' networks - are higher in New Zealand than other countries and may be inhibiting the entry of new mobile players.

Nelson said people were quick to draw a direct correlation between the decision to regulate mobile termination rates and the cost of calling for consumers.

What people needed to remember was that consumers had already seen a significant reduction in mobile termination rates in the past few years, Nelson said.

"All that was announced today was that we will begin the process of regulation and then there will typically be a glide path of rate reduction over five years.

"There will be no big bang theory on this," she said.

Labour communications spokeswoman Clare Curran said today's announcement would bring more certainty for consumers.

"This decision promises a fair point of entry for new entrants and more competitive pricing plans for consumers," she said.

The next step is to add mobile termination access services to schedule 1 of the Telecommunications Act by regulation.

The Commerce Commission will then go through a process to set prices and other terms which mobile carriers must offer.

It expects the regulation to take effect in September.