Mobile phone termination rates too high, says regulator

Mobile termination rates being proposed by Vodafone and Telecom are "significantly" higher than the Commerce Commission thinks they should be.

The rates are the amount mobile phone companies charge other carriers to terminate calls on their networks.

The commission is investigating whether mobile-to-mobile, fixed-to-mobile and short-message-service (SMS) termination should be regulated.

As part of that process Vodafone, Telecom and NZ Communications supplied undertakings to the commission, as an alternative to regulation, for the mobile termination access services.

Commission chairwoman Paula Rebstock said the mobile termination rates provided by Vodafone and Telecom in their undertakings were significantly above the commission's preliminary view on current international cost-based benchmarks.

Vodafone had offered rates starting at 15 cents per minute (cpm) and reducing over time to 11cpm for voice calls, and starting at 9.5c per SMS and reducing over time to 7c per SMS.

Telecom had offered rates starting at 16cpm and reducing over time to 10cpm for voice calls, and a flat rate of 3.5c per SMS.

"The commission's preliminary view, based on current benchmarks, is that cost-based termination rates could be as low as 7cpm for mobile-to-mobile and fixed-to-mobile voice calls, and 1c per SMS," said Rebstock.

The commission expected any revised undertakings would need to offer significantly lower mobile termination rates before the commission could consider recommending they be accepted.

The commission's investigation related to the wholesale terms that telecommunications companies charge each other, rather than the price that consumers directly pay for mobile calls. The commission can only recommend regulation at the wholesale level.

Increased competition, as a result of reduced wholesale charges, was expected to benefit end-users by leading to lower retail prices, said Rebstock.

Another issue being dealt with in the investigation is the approach to pricing.

The commission's preliminary view was that cost-based pricing was currently more appropriate than the bill and keep pricing approach proposed by NZ Communications because cost-based pricing was likely to best promote competition, Rebstock said.

But it might be appropriate for the commission to reconsider the adoption of bill and keep in the longer term, depending on market conditions.

Under bill and keep each network agrees to terminate calls from other networks at no charge, with each network keeping the revenue from their own customers' calls and SMS messages.

For cost-based pricing the sending network pays the terminating network for each call or SMS from the sending network's customers to the terminating network's customers.

Any revised undertakings from Vodafone, Telecom and NZ Communications must be supplied by April 22. After the commission has received any revised undertakings it will issue a draft report. A conference will be held before the commission releases a final report.

- NZPA