Go ahead for mobile termination rates regulation

Commercial offers spurned in favour of regulation; 3G calls to be covered as well

The Commerce Commission is sticking to its guns about regulating mobile termination rates (MTRs), the per-minute charges Telecom and Vodafone charge other telcos for for landing calls on their networks, in a draft report to David Cunliffe, the minister of communications.

In August, Cunliffe asked the commission to reconsider its recommendation from June that MTRs should be regulated. Both Telecom and Vodafone offered to lower the MTRs in stages over the next three years if regulation was avoided. However only Telecom’s offer was made public. Vodafone obtained a High Court injunction to keep its offer secret.

Currently, the MTR is 26¢ per minute. Telecom lowered its charge to 24¢ from September this year as per its offer, and said it would drop it to 18¢ in 2009. It also promised to pass all of the reduction in MTRs to fixed-to-mobile callers if the offer was accepted in lieu of regulation. Vodafone has not yet reduce its MTR.

Despite the offers from Telecom and Vodafone, Telecommunications Commissioner Douglas Webb says that regulation will bring substantial benefits to business and residential customers making fixed-to-mobile calls. The commission proposes to drop the MTR to 15¢ early next year.

The commission has also changed its stance on regulating voice calls landed on 3G networks. These were previously excluded from regulation, as the commission feared telcos would cease to invest in these. As both Vodafone and Telecom have now rolled out nationwide 3G networks the threat to investment in new technology from regulation is not as great as the commission first thought, according to Webb.

Webb says the commission expects the reduced MTRs will cut calling rates for customers, and intends to monitor retail developments in this area.

Telecom’s general manager for industry affairs and regulatory matters, Bruce Parkes, says the telco is disappointed that the commission spurned its commercial offer. That 3G calls will be included sends out a “not very resassuring signal to investors in infrastructure”.

Nevertheless, Telecom is pleased that the commission accepted that its original, final recommendation was flawed and has revised it, Parkes adds. Telecom remains concerned about the vagaries of regulation, according to Parkes, who says there aren’t enough checks and balances in the process beyond judicial reviews of the commission’s work.

Vodafone spokeswoman Leigh Owens didn’t comment on the draft recommendation apart from saying the telco would provide its views to the commission during the submission process. Owens adds that Vodafone is ready and willing to work with the commission to ensure the proposed regulation has a positive outcome for mobile customers.

As a result of what the commission terms “limited competition” between the two mobile operators, cellular calls in New Zealand cost between $0.49 to $1.39 a minute, the highest charges in the OECD according to a Ministry of Economic Development report.

The high charges means business and private users of mobile phones have paid hundreds of millions of dollars too much for many years, says Ernie Newman of the Telecommunications Users’ Association of New Zealand (TUANZ) which requested the commission’s investigation into MTRs in 2003.

Newman says TUANZ applauds the commission’s draft recommendation to regulate MTRs, and says it’s right to treat Telecom and Vodafone’s offers “with the suspicion they deserve”. It’s now time to stop analysing Newman says, and to bring in regulation which will end the excessive charging by Vodafone and Telecom.

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