Watchdog move tipped to slash cellphone rates

The Commerce Commission advised the Government to regulate the charge for companies to connect a rival firm's customer to one of their phones. Photo / The Aucklander

Lower cellphone charges have come a step closer with a Commerce Commission recommendation that the Government force phone companies to drop their rates for cross-network calls.

Under an existing agreement with the Government, Telecom currently charge 14c and Vodafone charge 14.4c per minute to ends calls on their network.

The fee is then passed directly to the caller.

Yesterday, the Commerce Commission advised the Government to regulate the charge, and suggested it could go as low as 4c a minute.

Although there is still a submission process before Communications Minister Steven Joyce approves the change, it is widely expected he will do so.

New Zealand and Mexico are the only countries in the OECD that do not control the rate mobile companies charge one another.

2degrees chief executive Bill McCabe said if the Government regulated, it would open up the market and create greater competition.

"This [could] bring better competition for consumers, and competition between networks. We have incentives to reduce prices between networks by a third. People are reluctant to call, or they make short calls because of the price. We will push prices down further and enhance our ability to compete, to broaden our market.

"All consumers will benefit from this. They will benefit from a ferociously competitive market."

On Tuesday, 2degrees announced it was dropping voice calls from 44c to 30c a minute for pre-pay customers.

This price includes the 17c cross-network fee.

This could drop by another 13c if Vodafone and Telecom dropped their prices as well.

2degrees fought hard for regulation but Vodafone and Telecom favoured a commercial solution.

Mr McCabe said the current rate was predatory and exploitative behaviour by the "two incumbents".

If the rate were dropped to 4c minute, that would finally bring New Zealand in line with international practices, he said.

Consumer NZ chief executive Suzanne Chetwin said the Commerce Commission announcement was good news for New Zealanders and the result was what the organisation had been pushing for.

"There are four million mobile phone customers; this will create innovation in the market. It means the cosy duopoly is over."

Ms Chetwin said regulating the rates could open the market to another two competitors, creating even greater competition and price reductions.

The Commerce Commission backtracked on its earlier recommendations in April, after Vodafone launched its highly aggressive Talk plan.

This favoured its own network by pushing prices down as low as 6c a minute to call other Vodafone customers.

Ms Chetwin said the Talk campaign was outrageous, anti-competitive and a clear illustration of why Consumer NZ had fought for regulation.

The commission said that while Vodafone's plan would provide short-term benefits for its customers, in the long run it would have detrimental effects on competition in the market.

Vodafone has previously said it will increase call prices if the rate is regulated but both Mr McCabe and Ms Chetwin said it would lose customers if it did this.

The minister will make his decision after submissions close.

WHAT YOU PAY

The customers' rates:

89c - Standard pre-pay rate on Vodafone and Telecom.

30c - 2degrees' latest price.

20c - What prices could drop to.

WHAT THEY PAY

Firms charge one another:

17c a minute - current cross-network rate.

4c - Rate Commerce Commission wants.

This story has been corrected from an earlier version, which said the phone companies charged each other 17c per minute to connect a rival firm's customers to one of their phones. Telecom currently charge 14c and Vodafone charge 14.4c per minute to ends calls on their networks.