Telcos' rate cuts fail to impress

New mobile phone network 2degrees has dismissed Telecom and Vodafone moves to cut termination charges - steps largely designed to stave off Commerce Commission regulation.

The company says even at half the price the dominant telcos would be making excessive profits from termination charges.

Termination rates are the costs mobile phone companies charge for receiving calls or text messages from other landlines or mobile networks.

Telecom is offering to halve termination rates from the current 15c a minute to 7c, but at a slower rate than suggested by the commission.

Vodafone yesterday extended a "discount" deal for 2degrees to any other new players but details are confidential so cannot be compared with the Telecom submissions and recommendations of a Commerce Commission report

The Telecom move to take the lead in the anti-regulation push coincides with Business New Zealand reportedly calling for a return to light-handed regulation in the telecommunications market.

2degrees chief commercial officer Bill McCabe said the Telecom submissions delayed reaching levels already identified by the commission as its benchmark, based on other regulated countries.

And he said even at 7c a minute they were above the cost price for fixed-to-mobile termination, which 2degrees estimated was 1c a minute for fixed-line-to-mobile communications.

He said that anything above the cost price represented profiteering by the incumbents.

Telecom chief executive Paul Reynolds said yesterday the company's plan for a glidepath reducing termination charges was a balancing act.

Having defended high charges in the past, Telecom yesterday acknowledged they needed to come down "over time". "Our proposal would represent a significant decrease on today's rates," Reynolds said.

Telecom believed its proposal balanced two imperatives - reducing the charge and maintaining its investment like the $600 million spent on its new XT Network.

"Telecom has decided to take the lead on this issue, and we are challenging the other mobile operators to match our offer," Reynolds said.

"If other mobile service providers agree, our proposed rates will continue to encourage investment across the industry and allow for the development of new mobile services."

Reynolds says Telecom has based its submissions on changes in Australia.

Telecommunications Users Association chief executive Ernie Newman dismissed the Telecom submissions, saying Telecom did not appear to be serious, and doubted whether the commission would be deterred from regulation.

Telecom closed down 7c at $2.81.

TERMINATION WARS
* Part of the cost of mobile phone calls is the "termination charge" paid for customers to pass through other networks.
* New Zealanders have seen termination charges fall from 20c a minute to 15c under voluntary deals from Vodafone and Telecom.
* The main effect of the high termination charges is to shut out new competitors.
* The Commerce Commission is looking at regulating charges, saying the high charges hurt consumers, the economy and competition.