Vodafone slams 'extreme' mobile ruling

Vodafone's general manager corporate affairs Tom Chignell Photo / Dean Purcell

Vodafone New Zealand says today's Commerce Commission decision forcing a nearly fivefold cut in mobile termination rates is "extreme" and "significantly below cost."

The country's largest mobile phone operator looks almost certain to appeal Telecommunications Commissioner Ross Patterson's order to slash the sum mobile operator's charge each other for ending a call on a rival network.

Currently, so-called "mobile termination rates" are between 15 cents and 17 cents, and will drop to 7.48 cents a minute from tomorrow, before settling at 3.56 cents by April 1 2014.

It cut the rate for text messages to 0.06 cents a message from 9.5 cents.

Vodafone's general manager corporate affairs Tom Chignell said the below-cost pricing will stifle new investment in the industry at a time when the government wants to improve next generation broadband networks.

"Vodafone is likely to seek a review, because the evidence shows that the price is significantly below cost," Chignell said in a statement. "No-one, including 2degrees, is saying that lower mobile termination rates will mean lower mobile calling prices."

However, Patterson expects there will be increased services, such as bundled packages and more calling volumes available, at current prices.

A major issue for the commission was the low numbers of calls from customers of one network to a rival network, suggesting current termination rates have been discouraging so-called "off-network" calling.

Today's decision is expected to lift calling rates between rivals.

Telecom, the second-biggest mobile operator, acknowledged the decision, and said it is already promoting plans that don't discriminate against calling other networks.

New entrant Two Degrees Mobile Ltd. welcomed the decision, which chief executive Eric Hertz said acknowledged the damage to competition which arises from high wholesale rates.

"This should be the beginning of the end of deals which penalise consumers for calling or texting other networks," Hertz said in a statement.

The decision comes after complaints mobile termination wholesale costs have been a barrier to entry for rival networks, and meant New Zealanders making fewer voice calls at higher cost.

Patterson said today's decision should rectify this, with the most likely outcome that consumers will be able to make more calls for the same amount of money.

"We expect people to use mobile phones fairly much as they would use fixed lines," he said. He expects the decision will lead to "lower retail prices or greater bundles of minutes to consumers."

The networks were given a one-year glide path to help bring in new retail offerings, with the wholesale rate falling to 5.88 cents a minute on Oct. 1, before dropping to 3.97 cents on April 1 2012, 3.72 cents on April 1 2013, before settling at 3.56 cents in 2014.

The decision to give a glide path wasn't unanimous, with Commissioner Anita Mazzoleni saying it wasn't necessary to promote competition.