New mobile entrants will struggle to gain a foothold in the market unless phone companies cut the rate they charge for accessing each other's networks, says a visiting economist.
Speaking at a telecommunications industry conference, market economist David Harbord said new mobile entrants struggled to attract subscribers when high mobile
termination charges - the costs mobile companies charge for receiving a call from a rival network - were added to calls.
Harbord said customers on small networks were likely to be making more calls to other networks - off-net - than those on bigger mobile networks.
"That mobile termination rate isa real barrier that makes the price of off-net calls high," Harbord said.
Small mobile companies would struggle to offer competitive calling plans when most calls were to people on another network and incurred a termination rate charge, he said.
Any attempt to lower the cost of calls to other networks could result in a crippling traffic payments imbalance and reduce profits per subscriber.
"That's a phenomenon that we've seen in every country in Europe that has a small mobile network enter in the last five or six years."
Harbord said that with the benefits of sending and receiving calls accruing to both network operators, the charges should be set at zero.
The new analysis of the effect of high termination rates was "deeply influencing" the thinking of regulators around the world.
In New Zealand the Commerce Commission is due to release a draft report on mobile termination rates next week. Commerce Commissioner Anita Mazzoleni says the objective is to ensure all providers have an even chance of competing for the $2 billion of revenue generated.
