Mobile rate cut won't benefit users

Paul Brislen. Photo / Paul Estcourt

People should not expect immediate savings on their cellphone bills, despite the Commerce Commission slashing mobile termination rates in half yesterday.

Mobile termination rates are the fees telecommunication companies charge each other for a call or text message that comes from a rival network.

So if a Telecom customer calls a Vodafone mobile, Vodafone charges Telecom the fee. The fee also applies when a call is made from a landline to a mobile phone.

The commission reduced these rates from 14c to 7c a minute for calls and from 9.5c to 0.06c for text messages.

Calling termination rates will be reduced to 3.5c by April 2014.

However, although these fees have fallen dramatically overnight, the public will pay the same price they did yesterday to both call and text.

Vodafone, Telecom and 2degrees all indicated yesterday they will not lower their prices after the rates cut.

In response, Telecommunications Users Association chief executive Paul Brislen demanded movement in prices.

Mr Brislen called for a "national day of calling" - for customers to call their provider and ask for cheaper rates.

"Ring the call centre, tell them you know the rates have come down and you want to know what your new price will be. Don't take no for an answer, demand a better price," he said.

If companies would not budge, Mr Brislen said, consumers should "vote with their wallets" and take their business elsewhere.

"Ring around and see what kind of deal you can strike. Someone will offer you a better rate than the one you're on today."

Vodafone justified its decision to keep prices up by saying there is no link between termination rates and what customers pay for calls.

Telecom and 2degrees, on the other hand, said they have already factored rate cuts into their retail prices.

"In recent weeks we have already dropped our mobile and fixed [line] to mobile calling rates, and Telecom will continue to deliver customers great value," said Telecom's Alan Gourdie.

2degrees' chief executive Eric Hertz said yesterday prices could come down over the coming months as the industry gets more competitive, but could not say when this would be.

This runs contrary to statements from Mr Hertz in December, when he said mobile operators could afford to lower prices if the termination fees fell.

Telecommunications Commissioner Ross Patterson said prices should fall "significantly" as the cuts will improve competition.

However, nothing in the commission's decision yesterday forces companies to pass on savings they could make to their customers.

WHAT IT ALL MEANS

What is a mobile termination rate?
An MTR is the fee one phone company charges a rival for a call or text made to its network.

Why are they being cut?
The Commerce Commission says cutting MTRs will increase competition and drive retail prices down.

Why are we not seeing any benefit?
Vodafone is keeping public prices as they are because they are not linked to MTRs. Telecom and 2degrees say they have already factored rate cuts into retail prices.

How far have they been cut?

Calls
* Yesterday: 14c a minute
* Today: 7.48c

Texts
* Yesterday: 9.5c
* Today: 0.06c

The price reduction YOU will see
* Zero