The SIM locking question

In the second part of our interview with telecommunications commissioner Ross Patterson we raise the thorny issue of SIM locking

Ross Patterson was appointed Telecommunications Commissioner four years ago and the beginning of his tenure coincided with the introduction of local loop unbundling and the operation separation of Telecom. In the second part of this interview he talks to Sarah Putt about the role of regulation in the mobile market.

Let’s move to mobile. Mobile termination rates were regulated in May 2011 and you’ve been monitoring the industry with three-monthly studies, is the market becoming more competitive as a result of regulation?

The trend is continuing in the right direction, slowly, but the issue, the fundamental thing that we are saying in the latest report [released December 2011] is that price difference has fallen between on-net/off-net which is critical, and Vodafone’s Best Mates plan has been expanded to include other networks.

Consumers shouldn’t be dissuaded from switching networks any more because of that on-net/off-net [differential] – but you can’t force consumers to switch. It’s going to be a slow and gradual move, but really consumers should be saying it’s not an impediment for me to move.

Would you look to regulate retail pricing?

What we have said is that we’ve got the power to impose retail conditions which are ancillary to wholesale regulation and there are many precedents for that. But our preference is that the issue fixes itself without the need to do that. We’re seeing the restrictive nature of those calling circles being expanded but we will keep monitoring it and we always reserve the right to intervene if we think it’s appropriate to do so.

What about SIM locking?

The issue first arose just before 2degrees entered the market and Vodafone announced they were going to SIM lock all their phones and we said we’ve got concerns about that and Vodafone ultimately decided not to do it. That was in the context of a new entrant and you had a change in policy by an incumbent and clearly the ability of a new entrant in that situation would have been pretty marginal, that’s why we had concerns.

In this case, which is the Skinny case, our position per se is SIM locking may be a good thing or a bad thing depending on circumstances such as how easy it is to unlock.

So you’re not concerned about SIM locking if it’s done by something like Skinny mobile?

It depends. It’s not who it comes from, it’s the nature of the lock, and the term, the ease to unlock and what the alternative is.

So you’re saying, let’s wait and see what happens?

No, there are some situations where you would say, ‘we think there is a problem’, before you do it, such as when 2degrees was about to enter the market. There are others where you would say this doesn’t appear to be a competition problem at all, so we’ll wait and see.

Telecom Retail CEO Alan Gourdie described Skinny mobile to me as a fully-owned MVNO (Mobile Virtual Network Owner)? But would it be different if XT Network was SIM locking?

Every situation would turn on its facts.

So you can’t just rule it out carte blanche. You’ve got to say, Skinny Mobile is just a tiny little part of the market, XT isn’t, so therefore there are different rules?

That’s one of the factors, [there is also] the nature of the term, the way you unlock it, the benefit that’s been given and what the transparency is to the consumers at the time to come in. And clearly also there is a brand issue - there has been a lot of adverse publicity as a consequence of this because a lot of people think it is not a good thing to do generally. So whether consumers will be happy to pick it up, who knows, the market may determine this as well.

It does go to show how you’re viewed by 2degrees — how necessary the Commerce Commission and regulation is to their business case?

We get some enquiries from other parties; they’re not the only one that will raise an issue of concern with us about something. Everybody does it.

Do you think they would have been able to launch without any regulation?

Clearly they faced a lot — spectrum issues that had to be resolved, numbering issues that had to be resolved. The important thing is that all those things were resolved in a way that enabled them to enter the market.

Numbering issues – what’s happened to the numbering plan?

The first thing that has happened is that that Numbering Administration Deed revised the number plan, having regard to the report that we put out about best practice. So that the numbering plan itself now accords with best practice.

The NAD is now talking with the Telecommunications Carriers Forum about looking at a proposal which would have the NAD become a working group of the TCF but which would enable someone to be NAD member only and only pay that part of the funding needed to run the numbering plan.

What’s your view of the TCF, what would you give it out of ten in a report card? Because it is a semi-regulatory organisation.

I think it really has reinvented itself under David Stone’s leadership, there were a lot of membership and constitutional issues that have all been resolved and it’s making a huge contribution to working groups and UFB and codes. I’d give it eight out of 10. There were a lot of difficult issues that internally had to be resolved and David to his credit has managed to pull it off.

The telcos will probably see their margins decrease as internet connectivity becomes more ubiquitous. Consumers will take up VoIP solutions, and/or substitute their mobile for their fixed line, and then there will be the era of the internet of things when household appliances will be connected and so on. What do you see the role of the telecommunications commissioner in this future?

The role of the regulator really is to deal with those infrastructure bottlenecks or other sorts of bottlenecks which inhibit competition from developing in upstream or downstream markets.

So you still will have local access monopoly provision – fixed local access to a consumer’s residence will always be provided by a single party.

Even in the fibre world that’s the case, so it will always need pricing oversight. The model we’ve developed (for UFB) is contractual with a regulatory default position – it’s a very good model I think.

You would expect the nature of the regulatory oversight to shrink but the bottlenecks move, so what your focus is tomorrow may be different then today, but the principle remains the same.

It’s clear that the issue for the future is the migration of services from copper to fibre.

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