US, Vodafone in conflict over termination rates

NZ's 'among the highest in the world', trade body claims

The Office of the United States Trade Representative is once again pointing the finger at New Zealand for our high termination rates (MTRs) for mobile calls. Complaining that our MTRs are “among the highest in the world”, the USTR says American companies are worried about these costs.

“Unreasonably high rates due to limited market competition” are seen as service barriers in New Zealand for US industry, according to a report by the USTR. The USTR plays a major role in setting US policy on free trade. It also produces reports on countries in which American companies are active.

High MTRs have come in for USTR criticism in the past and the United States intends to continue monitoring how the New Zealand government regulates termination of voice calls made from fixed home or business phone calls to mobile networks.

But Vodafone, the operator with the most to lose if MTRs come down as a result of regulatory change, says the USTR’s criticism has to be understood in the context of the “called party pays” regime which prevails in the United States.

Tom Chignell, Vodafone’s general manager of commercial development, says mobile customers in the US pay their network supplier to both make and receive calls. However, in New Zealand, the regime is one of “calling party pays” says Chignell, with the telcos then charging each the cost of terminating these calls on their networks.

Network operators receive the same amount of money, Chignell says, but the difference between the US and New Zealand lies in who pays. From a US perspective, he says New Zealand MTRs look high, as they are higher than US ones. But, he says, US MTRs are very low and are, in fact, below cost.

He says that the USTR report is not the first time Vodafone has heard of US concerns over local termination rates and he isn’t surprised that they’re being repeated “in an environment where the regulation of MTRs is still on the agenda.”

But, Chignell says, during the government’s three-year investigation into MTRs, New Zealand rates have dropped from 27¢ per minute to 17¢. And Vodafone has promised to drop its rate to 14.4¢ in the next four years.

Telecom New Zealand spokeswoman Sarah Berry would not comment on Telecom’s policy, saying only that Minister Trevor Mallard is expected to decide on MTRs soon, when the rates are likely to be reduced.

Communications Minister David Cunliffe was forced to delegate the decision regarding MTRs to Trevor Mallard after National’s Bill English accused him, in Parliament, of currying favour with Vodafone.

While the USTR is critical of our high mobile calling rates, New Zealand gets a tick of approval for unbundling the local loop and curbing Telecom’s “anti-competitive behaviour”.

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