Mobile Termination Rates will be regulated

Process likely to take months

ICT Minister Steven Joyce has accepted the Commerce Commission’s recommendation to regulate mobile termination rates (MTRs).

MTRs are the fees the mobile carriers pay to terminate calls on each other’s networks. In a short statement released this morning Joyce says regulation of these fees will improve competition in the mobile market and result in lower prices for mobile phone users.

“The next step is to add mobile termination access services to schedule 1 of the Telecommunciations Act. The Commission will then go through a process to set prices and other terms which mobile carriers must offer. The process is likely to take a few months,” the statement reads.

2degrees delighted

2degrees CEO Eric Hertz says he is encouraged by the message the Minister’s decision to regulate sends to the industry.

“The government’s vigilance will be crucial in coming months because 2degrees has plans that will unsettle its competitors, but delight mobile consumers,” he says. “Excessive mobile termination rates have held competition back for more than a decade," he claims. "All OECD countries, except Mexico, regulate MTRs and this decision will bring New Zealand into line with international best practice.

Hertz told Computerworld he expects the process to take six to nine months, "possibly longer". The company would like to see MTRs for text be zero (that is Bill and Keep) and voice MTRs under 2 cents.

The company's chief commercial officer Bill McCabe says the current MTRs are 15c for voice (McCabe suggests that in New Zealand per second billing doesn't begin until after the first minute of the call, so it is really 18.45c a minute) and 9.5 cents per text. 2degrees has confidential agreements with both Vodafone and Telecom on MTRs.

He says in countries such as India, where MTRs are under a cent, average monthly voice calls are more than 600 minutes a month, in New Zealand it's under 60 minutes a month.

Yesterday, 2degrees celebrated its first birthday by launching its 3G network and annoncing new mobile data plans. At that event, McCabe told Computerworld he had a “hunch” the Minister would announce a decision on MTRs this month.

Telecom unconvinced

Telecom spokesperson Mark Watts says the carrier has never been convinced of the need for regulation of MTRs.

“In particular the arguments around competition and choice we thought were weak against the backdrop of a market that is giving more choice, more competition to New Zealand mobile customers than it has ever done,” he told Computerworld.

“Just yesterday one of our competitors launched a 3G offering, XT is a huge investment - we’ve got more than 600,000 customers, and a global player in the market as well. All of that in a country of four million people, looks like a lot of competition and choice and it has been manifested in prices that have been falling anyway.”

Watts says some of the other arguments for regulating MTRs are weak, such as on-net pricing. “Telecom doesn’t have on-net XT pricing plans,” he says.

Vodafone disappointed

Vodafone has released a short statement from GM of corporate affairs Tom Chignell expressing disppointment with the decision to opt for regulation and reject an industry solution "that would have delivered lower mobile termination rates sooner."

" New Zealand mobile telecommunications market is dynamic and active, and to further regulate at this point would only interfere in what is proving to be the most competitive part of the overall telco sector. Vodafone sees no evidence that there will be material benefits to mobile or fixed-line customers from regulating mobile termination rates. However, Vodafone will continue to work with the Commission through the process for the months to come," the statement reads.

TUANZ says it's about time

TUANZ CEO Ernie Newman says in a media statement that the decision to regulate MTRs is the right one, “but it comes many years too late.”

“It’s seven years since TUANZ asked the government of the day to join with other countries in regulating these anti-competitive charges. Over that time New Zealand mobile phone users, both personal and business, have paid hundreds of millions of dollars of excess charges to the mobile networks, as well as seeing competition in the mobile phone market restricted by these anti-competitive tariffs imposed by the market leaders Vodafone and Telecom,” he claims.

He believes MTRs have led to on-net pricing deals that undercut competition in the New Zealand mobile market.“The so-called discount rates that customers pay for calls on the same network should apply regardless of which network the called party is on. TUANZ calls on Vodafone and Telecom to pre-empt regulation by immediately opening their networks to cross-network traffic without a surcharge. This means their price plans that allow preferential pricing to other users their customers call regularly, should apply regardless of whether the user is on the same network or a different one.

“Such an action would make life much simpler for customers, be fair to competitors such as 2degrees, and place the mobile phone sector in the same environment of open competition that its business customers routinely face up to in a modern economy.”

Newman is currently at an APEC telecommunications conference in Brunei and advises that his phone is switched off. "Mobile roaming rates (the next big issue) mean that calls back to New Zealand cost $300 per hour."

Commerce Commission’s timetable

The Commerce Commission expects the Minister’s decision to take effect in the later half of September 2010. In a statement Telecommunications Commissioner Ross Patterson says he is confident that “the issues that need to be considered are clear and can be addressed in a timely manner.”

In dealing with MTRs, the Commission must abide by the following process under the Telecommuniations Act:

  • give public notice of the standard terms process (section 30D);
  • conduct one or more scoping workshops, to determine the period of time within which an access provider must submit a standard terms proposal and to identify any additional requirements for that proposal (section 30E);
  • after the scoping workshop, give written notice to one or more access providers of the service requiring them to submit to the Commission, by the date specified in the notice, a standard terms proposal (section 30F);
  • upon receipt of a standard terms proposal, give public notice of the proposal and specify a date for submissions on the proposal (section 30I);
  • prepare a draft standard terms determination, including both price and non-price terms (section 30K);
  • request submissions on the draft determination (section 30K). In practice, the Commission generally provides an opportunity for cross-submissions;
  • consult interested parties or hold a conference (section 30L). The Commission usually holds conferences during the development of standard terms determinations; and
  • prepare a final standard terms determination that specifies sufficient terms to allow, without the need for the access seeker to enter into an agreement with the access provider, the designated access service or specified service to be made available within specified timeframe (sections 30O and 30P).

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Tags mobile termination ratesRoss PattersonSteven Joyce

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