Vodafone offer pushes Commission to regulate

Vodafone's latest '$12' offer is being blamed for the Commerce Commission deciding to now regulate mobile phone termination rates.

Vodafone's latest marketing deal has pushed the Commerce Commission to backtrack on an earlier decision and it is now recommending the Government regulate mobile phone 'termination rates'.

The commission has been concerned mobile termination rates - the fee telcos charge each other to receive calls and texts from competitors' networks - are higher in New Zealand than other countries and may be inhibiting the entry of new mobile players.

In a draft report out today, the commission says earlier undertakings offered by Vodafone and Telecom would not address competition concerns.

Communications Minister Steven Joyce earlier asked the commission to look into Vodafone's latest pre-pay plan - called "Talk Add-on".

This offer lets the mobile phone company's prepay customers buy 200 minutes of voice calls to any other Vodafone mobile customer and any landline for $12 a month.

Vodafone spokesman Paul Brislen said he couldn't comment on the latest recommendation, but earlier said reducing termination rates would cost the company a net $80 million a year for the next five years.

2degrees chief commercial officer Bill McCabe said the recommendation was encouraging and would bring the market into line with international best practice.

Mexico was the only other country that did not regulate mobile termination rates, he said.

"It's very good news for the consumer and yes we are beneficiaries, but ultimately the major beneficiary is the consumer because it will bring innovation and better pricing in the market," he said.

Labour's communications and IT spokeswoman Clare Curran said today that Joyce should accept the revised recommendation.

"The minister must act swiftly to regulate so that the industry can move forward without uncertainty," she said.

She said the commission had accepted that gaming behaviour by big telcos in the market represented a barrier to expansion by a new entrant, and regulation would provide certainty and fairness for consumers and players in the telco market.

The commission is inviting submissions on the draft reconsideration report, which are due by May 19, and Joyce said it wasn't appropriate to comment in the meantime.

"The next step is for them to consult with affected parties and it's important that we let them get on with that," he said. "I expect the commission to release its final report in the next month or so. I will consider the final recommendations and endeavour to make a decision in a timely manner."

Telecommunications Commissioner Ross Patterson said the Vodafone plan offered since the final report, "perpetuates the barrier to expansion that the final undertakings, if accepted by the Minister, were designed to remove".

While lower retail proces were generally good for consumers, the deal as a whole, which included "above-cost wholesale mobile termination rates" created a barrier to efficient expansion by any new entrant, said Patterson.

"In light of such developments, the commission's preliminary view is that if cost-based mobile termination rates were put in place, then all mobile operators would be able to vigorously compete in the retail market and provide consumers with competitive and innovative calling products," he said.

Telecom said last year that it would start reducing the termination rate for voice calls this March from 12c down to 6c by the end of 2013.
Under its proposal there would be no charges for texts, which now incur a 9.5c charge, unless there was an imbalance in the number of texts sent between networks.

At present voice calls incur a 15c-a-minute charge, with text messages costing the originating network 9.5c.

Draft pricing released by the Commerce Commission in June suggested voice calls should have a termination charge of 7.2c a minute, reducing to 3.8c a minute by 2015, with texts costing 0.5c each by 2015.

Submissions to the draft reconsideration report are due with the commission by May 19.

The final reconsideration report is expected to be delivered to the Minister in early June.

See the Commerce Commission release here.

with NZPA