Vodafone, Telecom given last chance to cut mobile rates

Sombre session closes two-day Commerce Commission conference

Vodafone and Telecom have been given less than a month to voluntarily slash the charges they impose on carriers to route calls and texts to mobile phones, before the Commerce Commission recommends the government does it for them.

Arguments over whether Vodafone should be allowed to make an 11th-hour bid to try to stave off the regulation of mobile termination charges were the meat in the sandwich at a two-day conference in Wellington, organised by the commission to get feedback on its draft recommendation to regulate.

During a sombre session on the closing day of the conference, Vodafone regulatory affairs manager Richard York said the company was keen to resolve the issue, which has vexed regulators and politicians for more than seven years.

Hundreds of millions of dollars are at stake. Vodafone said the regulation of mobile termination fees at rates proposed by the commission in a draft report would cut its revenues by $500 million over five years, with "a material impact on our business plans and capacity to invest in New Zealand".

The company wanted more guidance from the commission on the rates that might be set through regulation and the supposed benefits before it made a final offer to cut its charges. But Telecommunications Commissioner Ross Patterson told the company it now had all the information it required to submit "an informed revised" undertaking by October 2.

Fellow commissioner Anita Mazzoleni said it was up to companies to make their own decisions about pricing in the undertakings, but warned the commission would find it difficult to recommend grounds for accepting prices materially different to those they internalised for "on-net" calls. It is understood that implies a big drop.

2degrees chief executive Eric Hertz had earlier argued the commission should not give Vodafone the chance to make another offer. He said it would be an "idle, coercive attempt to influence the politicians and look good in front of the minister at the last minute". Mr Hertz hit out at a warning by Vodafone chief executive Russell Stanners that mobile termination regulation would reduce its ability to invest in fibre-optic broadband infrastructure, saying that amounted to a "backroom bribe".

Telecom has volunteered to halve the fees it charges telephone companies for routing calls and texts to its customers to 7 cents a minute for calls and 3.5c for texts by 2015, in a bid to stave off regulation. Vodafone has not yet improved an offer it made in January to drop its fixed-to-mobile termination charge by 3c to 13c a minute, and to cut both fixed-to-mobile and mobile-to-mobile termination charges to 11c by 2014, with a 7c charge for texts.

The commission said in July that its preliminary view was that call termination charges should be halved from 15c a minute to 7.2c and the price for routing texts slashed from 9.5c to 0.95c.

Telecom industry and regulatory affairs manager John Wesley-Smith upped the pressure on Vodafone and 2degrees to lower their rhetoric.

"We want to see Vodafone and 2degrees step up with their own realistic undertakings and we want to see the commission taking a more active role in facilitating that outcome," he said.

Telecommunications Users Association chief executive Ernie Newman said setting termination charges at cost would get rid of the incentive for the mobile incumbents to charge cheaper prices for calls and texts to customers on their own networks, and higher prices for "off-net" calls and texts.

"That is why so many New Zealanders carry two phones. Imagine if there were excessive termination rates for landline calls. Each of us would have our living-room walls lined with phones so we could call people on different phones depending which network they were on."

Stanners said bundled deals, such as its Best Mates and Text2000 offers, were a feature of other industries.

"McDonald's has value meals and combos. In Hallensteins, socks are cheaper if you buy them three pairs at a time. Six-packs of beer and wine are cheaper than by the bottle, and Microsoft Office is cheaper than buying its components individually. There is nothing anti-competitive about our approach to pricing."

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Tags Vodafonetelecom2degreesCommerce Commissionmobile terminationNetworking & Telecomms ID

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