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Telecom, Vodafone win over regulator on mobile rates

Monday 22nd February 2010

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Telecom and Vodafone New Zealand have won over the regulator with their last-ditch effort to avoid regulation for mobile termination rates (MTRs).

Telecommunications Commissioner Ross Patterson has recommended Communications Minister Steven Joyce accept the final undertakings from Telecom and Vodafone, although not without a dissenting opinion from his temporary replacement in the role last year.  

The telcos' proposals see the fee they charge for ending a call on a rival’s network drop to 12 cents a minute from March, falling to 6 cents by 2014.

The phone companies would also essentially drop termination rates for text messaging.  

“I have concluded that both regulation and acceptance of the final undertakings would address the competition concerns that the (Commerce) Commission identified,” Patterson said in a statement.

“The long-term interest of consumers will best be served by applying the least intrusive means to address the competition concerns identified in the investigation.” 

In October, the two phone operators expressed their dismay at the mounting regulation being forced on them by the commission in their submissions on mobile termination rates, and in December they aligned their bids in a successful last-ditch effort to dodge more rules.  

Patterson said the rates offered by Telecom and Vodafone address any concerns about competition, though they “remain above the range of the Commission’s cost-based benchmarks,” and should lead to better prices and services for customers. 

Still, the decision wasn’t cut-and-dred, with commission member Anita Mazzoleni opposing the course not to regulate. She said though the undertakings will reduce mobile termination rates three months earlier than regulation, MTRs will remain up to 110% above current estimates during the glide path, and stay 20% to 50% higher by the end of the period.  

Mazzoleni took the lead on telecommunications issues during Patterson’s 10-month absence, and in June she shot down the submissions from Telecom and Vodafone, saying the regulator’s recommended rates were “significantly below the prices recently offered.”

The Commission wanted MTRs to drop immediately to 7.2 cents a minute, gliding down to 3.8 cents by 2015.  Shares in Telecom rose 0.9% to $2.36 on the NZX today.  

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