The Commerce Commission has released its decision on mobile termination rates, the charges telcos levy on one another for transferring calls between their networks.
Termination rates for calls will drop to less than four cents by 1 April 2012, with further reductions until 2014. Termination rates for text messages will drop to 0.06 cents from 6 May 2011.
At today's press conference Telecommunications Commissioner Ross Patterson, while suggesting that “in general” lower mobile termination rates result in lower retail charges to the user, acknowledged that in benchmarking MTRs across a number of countries, the Commerce Commission did not look specifically at that relationship.
The model for determining pricing is complex, Patterson says, reacting not only to costs but to competitive pressure. The Commission’s expectation is that both effects will be enhanced following its decision, since high MTRs act as a barrier to new entrants. The Commission’s decision to enforce substantial cuts will improve the strength of competitors such as 2degrees and hypothetical future new entrants to the market.
While the decision enforces a drop in termination rates from the current 15-17-cent level to 7.5 cents immediately, with a further “glide-path” to 3.56 cents in 2014, telcos will have built at least some of the costs reduction into their charges already, Patterson says. Any retail decrease is as likely to be in the form of new price bundles as in simple overall reductions, he adds.
The Commission decided not to directly regulate differences between “on-net” and “off-net” pricing – the charges made for calling mobile phones on the same network as compared to those on a competitor’s network – despite it being acknowledged that these differences are large in New Zealand and have the effect of deterring users from moving to a provider that their friends and colleagues are not using.
Questions have been raised over the legality of imposing restrictions on on-net/off-net pricing differences. Patterson says the Commission has reassured itself that such action would be within its legal powers, but it has nonetheless decided not to do it at this stage.
The Commission will continue to monitor the situation and will expect the on-net/off-net difference to erode over time; but Patterson says there are no definite trigger points established that will signal a move to regulate in this area. It’s still a growing and changing market, he says, so any fixed thresholds would rapidly become outdated.
High retail charges have also contributed to a generally lower use of mobiles for voice and Patterson says this too can be expected to increase.
Termination rates for text-messages will drop immediately to 0.06 cents. The Commission had considered the merits of a bill-and-keep regime (a zero charge in recognition that traffic flows both ways between networks) but was persuaded that not charging for texts might encourage spam.