Between the lines: Vodafone's chest-beating a puzzling change

How could Vodafone have been so immoderate?

To rehash history of two weeks ago, it made a targeted press release to selected media taking to task the telecommunications inquiry.

The result: reports on National Radio and in a Wellington newspaper of Vodafone bagging the inquiry for losing its way in daring to suggest that new entrants to the cellular market be given a helping hand through temporary access to incumbents' cellular networks.

Vodafone no doubt had a point to make.

But its outburst was surprising given that its stance has usually been to avoid public chest-beating, even if it does lobby vigorously behind the scenes. But complain it did, curiously to reporters who were not covering the inquiry. And with the reports coming out the same morning as Vodafone was presenting to the inquiry, there can be little doubt that this little warm-up did nothing to moderate what apparently was a testy time as chief executive John Rohan stated his case.

Furthermore, it seems that in private discussions Vodafone had already agreed on some sort of formula with the inquiry concerning the contentious mandatory roaming issue.

That arrangement would involve the suspension of any requirement for mandatory roaming so long as there had been good-faith commercial negotiations lasting perhaps six to 12 months. If they failed, then an appeal to the regulator could be made. If, on investigation, the regulator found the incumbent network operator at fault, a recommendation to regulate could be made to the Communications Minister.

The issue of mandatory roaming is far from trivial. If terms are too generous to the new entrant, then either Telecom or Vodafone could end up subsidising a competitor. Indeed, it could be argued that a fair price to a new entrant could cover the incumbents' lost opportunities for profit, or opportunity cost, as in the infamous Baumol-Willig principle endorsed by the Privy Council.

But in cellular, six to 12 months is far from a fast-track negotiation.

It is easy to see the process dragging on for 18 months, or enough time at current rates for Vodafone to again treble its subscriber base.

Vodafone may be playing to another audience. While regulation is abhorrent to both Telecom and Vodafone, both seem resigned to the idea that there will be a regulator.

But both are keen to ensure the regulator is not a stand-alone, but operates within the Commerce Commission.

One can only think this is because of the commission's lacklustre record in telecommunications. But any noise now may not be lost on a Government gun-shy of business after ACC and Employment Relations Bill difficulties.

Commerce and Communications Minister Paul Swain may be just the man for them. His pre-election rhetoric has been followed by less than impetuous haste in getting on with promised Commerce Act and takeovers reform.