Commission recommends mobile regulation

Commission recommends mobile regulation

By TIM HUNTER – BusinessDay.co.nz
Last updated 10:15 16/06/2010

The long struggle of mobile phone newbie 2degrees was vindicated today with the Commerce Commission’s decision to recommend regulation of mobile termination rates.

The move reverses the commission’s previous recommendation in February to accept commitments from Vodafone and Telecom to gradually reduce termination rates – fees telcos charge each other to connect calls on their networks.

2degrees chief operating officer Bill McCabe said the decision was a “positive prelude to real improvements in mobile call rates.
“We won’t see change until this decision is accepted by the Minister,” he said.

Telecommunications commissioner Ross Patterson said: “The Commission considers that cost-based mobile termination rates, when compared to the offers in the undertakings, will better promote competition in the mobile market and will be in the best long-term interests of end-users.”

A key influence on the commission’s rethink was Vodafone’s introduction in April of a new price plan, Talk Add-on, just two months after it had recommended against regulation.

The offer, since withdrawn, was promoted by Vodafone as “just 6 cents a minute to Vodafone NZ mobiles and landlines in New Zealand” and led communications minister Stephen Joyce to ask the commission to review its decision.

The use of “on-net” pricing, in which telcos charge much less for customers calling within their own network, is seen as a major competition issue. Because MTRs are priced well above cost, telcos can offer substantial discounts for on-net pricing where no MTRs are payable.

New entrants to the market such as 2degrees have few on-net customer calls and struggle to compete with on-net promotions such as Talk Add-on.

Responding to the commission’s announcement today, Joyce invited submissions and said he would decide in “a timely manner” whether to regulate.

Telecom and Vodafone had offered a gradual cut in MTRs from about 18c a minute this year to 6c a minute in 2014. If Joyce decides to regulate, those rates would likely fall faster and lower.

Article from www.stuff.co.nz