Mobile termination: Vodafone makes preemptive offer

Deal with 2 Degrees to be offered to all, ComCom releases MTR submissions

As submissions on mobile termination go live on the Commerce Commission's website today, Vodafone is making a preemptive offer to avoid regulation.

Vodafone spokesman Paul Brislen says the same mobile termination deal offered to 2 Degrees will be extended to any other mobile entrant.

Brislen says that deal is confidential and hasn't been seen or, therefore, considered by the Commerce Commission. Vodafone has challenged 2 Degrees to make the detail public.

As part of Vodafone's submission it includes a report (pdf), commissioned from UK consultancy Analysys Mason, which says describes the Commerce Commission's analysis as "simplistic".

"The commission's benchmark analysis of MTAS [mobile termination access services] costs is simplistic and produces a result that risks being inaccurate," the report says.

"The commission's international benchmarks for MTAS costs show a very large variance, and are taken from a limited sample of international jurisdictions, without any adjustment for local market and economic conditions."

Vodafone has been pushing an alternative analysis for months, including a larger number of OECD countries in its basket (see chart below). That analysis shows New Zealand in mid-field on termination charges rather than trailing. Vodafone also argues that it shows MTR costs have little relation to actual mobile charges paid by consumers.

In June, The Commerce Commission recommended mobile termination undertakings from mobile operators Vodafone, Telecom and 2 Degrees be rejected and that mobile termination prices should be regulated. It also announced that it intended to commence a Schedule 3 investigation into whether regulation of the national mobile roaming service should be extended to include price.

It found in its draft report that mobile termination charges were "significantly above cost".

The boss of user association TUANZ, Ernie Newman, welcomed the report, saying he was "100 percent happy" and the result was predictable.

The Analysys Mason report, however, criticises the countries included and excluded from the Commerce Commission's basket used for market analysis.

"As a results of the commissions benchmarking exercise appear not to be very robust, we recommend that the commission revises its position regarding the definition of cost-oriented MTRs," it says.

In the war of statistics, however, 2 Degrees, has its own report (pdf), from consultancy Concept Economics, which argues the ability to provide on-net pricing specials created by MTRs will result in entrants paying a subsidy to incumbents.

"Given the circumstances described above, when a customer switches away from incumbent to the entrant, contacts who call that customer will face high off-net calling and SMS charges," the report says. "It can therefore be expected that there will be a traffic imbalance — that is, that the customer will have more outbound than inbound traffic.

"That imbalance will create net outpayments, with the effect that in the counterfactual where mobile termination prices are well above cost, the entrant is in effect paying a subsidy to incumbent networks. This subsidy in itself creates a hinderance to entry."

Vodafone’s GM of corporate affairs, Tom Chignell, says in a statement released this morning that the Commerce Commission has paid little attention to the interconnect arrangements between Vodafone and 2 Degrees because the offer was not available to all access seekers.

"We believe the deal is good enough to get 2 Degrees into the market and so we will extend it to all new entrants on the same pricing and terms,” he says.

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