Telecom offers to halve mobile termination rates

Concessions flow after Commerce Commission threatens regulation

Telecom is today offering to more than halve mobile termination rates. However, the full reduction won't come until 2015.

The move comes as Vodafone offers to extend its termination deal with 2 Degrees to any other mobile entrants. The terms of Vodafone's deal are unknown, however, due to contractual obligations with 2 Degrees.

The concessions are flowing after the Commerce Commission threatened price regulation of mobile termination. Ironically, earlier today Business New Zealand called for a return to light-handed regulation in the telecommunications market.

In its submission to the Commerce Commission (pdf), Telecom has offered to decrease mobile termination rates, from 15 cents per minute today down to 7 cents by 2015.

“We recognise that mobile termination rates need to come down over time, and our proposal would represent a significant decrease on today’s rates, and a further cut to the rates we had already agreed in the deed we signed with the government,” says Paul Reynolds, Telecom's CEO in a statement.

“At the same time, it is critical that Kiwis continue to have access to world class mobile services at great value across the board. We believe the price path we have proposed balances those two imperatives better than the proposed regulation would, and better serves New Zealanders.”

Telecom say it has based its proposed rates on those determined by the Australian Competition and Consumer Commission (ACCC) for use in the mobile market in Australia.

Reynolds says the ACCC has calculated a cost-based termination rate in Australia that supports investment and allows for competition on price, quality and variety of services. He says the launch of Telecom's $600 million XT Network is an example of huge investment in world class mobile services in New Zealand.

“Mobile services are not a commodity, and there is an important balance to strike in creating a regulated market that supports this," he says.

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