Vodafone has labelled the Commerce Commission’s decision on mobile termination rates “extreme” and may seek a review of the wholesale prices set today.
In the final determination announced today, 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 tomorrow. In a statement Vodafone general manager corporate affairs Tom Chignell says the commission has adopted an extreme view and taken arbitrary benchmark rates which are far below cost. He says the four cent per minute voice is extreme in comparison to Australia (10c) and Europe (11c) and that SMS is unregulated in most countries. “Competition in the New Zealand mobile market is very healthy. There are three strong mobile operators and 11 brands. 2degrees' remarkable success is testament to this. No one, including 2degrees, is saying that lower mobile termination rates will mean lower mobile calling prices,” he says. “All parties have the option of requesting a formal review of the prices the Commission has set. Vodafone is likely to seek a review because the evidence shows that the price is significantly below cost.” 2degrees reaction Chignell’s counterpart at 2degrees, Bill McCabe, who in his role as chief operating officer has fought Vodafone on its position on MTRs, says he is not surprised by the telco’s view today. “I would expect Vodafone to fight to the end on this. The Commission has always said they will regulate down to cost, so it’s in line with our expectation, so I’m not surprised it’s not in line with their expectation," he says. Since the intention to regulate was announced in August, 2degrees pushed hard to get a ban on net/off net price discrimination (that is pricing plans in which customers are given substantial discounts when they phone people on the same network), which they claim is a barrier to competition. The Commission stopped short of a ban, but did say it would monitor the market on a monthly basis and that it has the power to legally intervene*.
“The commission is very aware there are two sides to this. One is the wholesale and the other is how that impacts the market. They’ve said throughout that NZ is a unique market where you’ve got 90 percent of calls on net,” says McCabe. “They have now said ‘you guys better watch out because we have the legal ability to do this, we’re going to watching you every single month to ensure that these lower rates are passed through to all customers and stop penalising customers for calling customers of rival networks’". 2degrees CEO Eric Hertz says he expects there will be movement in mobile retail pricing. “We certainly are looking at this and have things in the works. I would expect to see something in the next 30-90 days in the market place.” He says he has no announcement on pricing today, nor would he “preannounce to my competitors in the newspaper.” Impact on Telecom Aside from Vodafone, the other loser in today’s decision may be Telecom. Hertz says that lower mobile pricing could mean consumers may reassess the need for a fixed land line service and go “mobile only”. “One of the things that will begin to happen in New Zealand, that has happened more quickly in Australia and other parts of the world, is that people will also realise that their home fixed line has less and less value and maybe a mobile is all they’ll need,” says Hertz.
“I think over the course of the next year people will be having a really close look at that, because it is safe to talk. Before you felt like it wasn’t. I can’t tell you how many people I’ve met who say I can’t talk on my phone, I’ll wait until I get to my home or my office.”
Telecom released a statement today noting the Commission’s decision. Telecom Retail CEO Alan Gourdie says that with the long-running mobile termination rate process complete, Telecom remains focused on bringing its customers great value products and services across the board..
“What is clear right now is that the mobile market in New Zealand today is more exciting and competitive than it’s ever been, and customers have greater choice of prices, products and services,” he says.
* See page 17 of the decision: “The Commission has jurisdiction to impose a condition limiting on-net off-net price differentiation under section 30O of the Act as a part of the regulation of wholesale MTRs, if it considers this is necessary in order to address the competition concerns."
Tuanz says customres should pressure telcos into passing on savings
Tuanz is calling on customers to force telcos into passing on savings from less expensive calls and texts to customers, so that they benefit from the regulatory changes announced today.
In a statement today, Tuanz CEO Paul Brislen says "The Commerce Commission has reduced the termination rate for a voice call from around 15 cents per minute to 7.48 cents per minute from today.
That means any company offering calls to a mobile phone now pays the mobile phone company nearly 8 cents a minute less than it did yesterday.
"You should be entitled to a share in that, if not all of it.
“Ring the call centre, tell them you know the rates have come down and you want to know what your new price will be. Don’t take no for an answer – demand a better price. The Commerce Commission says there are 4.7 million cellphone users in New Zealand – we have the loudest voice in the country so let’s use it.”