A possible investigation by the Commerce Commission into mobile termination rates does not go far enough for providers Orcon, CallPlus and WorldxChange, who want to see the investigation broadened.
The trio are pushing for any investigation to also cover termination fees charged for calls from landlines to mobiles.
Orcon, in its submission to the commission, says price differences between on-net and off-net calling rates, the growing practice of bundling landline services with below-cost calls to the provider’s mobile network and SMS termination rates all pose barriers to the development of mobile competition.
Mobile termination rates are the fees mobile phone companies charge other carriers to terminate calls on their networks and are a significant contributor to the retail prices of mobile charges, according to the Commerce Commission, which is considering an investigation into whether these rates should be regulated. Earlier this month, the Commerce Commission released a further issues paper before deciding whether to launch an investigation.
Graham Walmsley, CallPlus’ general manager of wholesale and regulation, describes the termination rates as “artificially high”.
“The ongoing bundling of mobile packages bundled with broadband and fixed line services, are creating offers which fixed line and broadband providers are unable to match,” his submission says. “Integrated fixed and mobile companies, particularly those with a dominant position in mobile and a low share of fixed line, are able to extract ‘monopoly profits’ from their dominant mobile position and cross-subsidise their fixed services.
“In addition CallPlus would expect that mobile-to-mobile termination rates would be in step with fixed–to-mobile rates as any artificial difference would drive substitution between fixed and mobile calling or the other way.”
Paul Clarkin, director of operations and carriers at WorldxChange, says termination rates have been discussed “many times over the past few years”.
“To date the mobile operators have managed to bargain themselves out of having termination rates regulated by agreeing to a price decrease of one cent per year which has ensured their monopoly profits on mobile calls.”
In its submission, Vodafone retails the history of the Commerce Commission’s investigations to date in areas such as co-location and the negotiation of a national roaming agreement with potential market entrant NZ Communications before addressing termination. Tom Chignell, Vodafone’s GM of corporate affairs, then asks, in reference to NZ Communications, how much more support the commission believes a “group of mainly private equity investors really need?”
Chignell argues that the effect of termination rates is balanced between large and small operators and that there is no evidence of market failure because NZ Communications has not launched yet.
Vodafone also provides an analysis of the effects of on-net pricing by its head of regulatory economics, Dr Jonathan Sandbach. Sandbach writes that the perception that such pricing can be predatory is “not supported by economic literature”. He says such differentials in Europe have been used by both large and small carriers to no decisive advantage.