Commerce Commission recommends regulation of mobile termination rates

Wednesday 16th June 2010

The Commerce Commission has recommended the regulation of fees mobile phone companies charge each other for ending calls on their networks, saying there was too much potential for incumbents to block new entrants to the market.

The mobile termination debate has completed a 360-degree turn after the regulator backed down from setting wholesale price levels in February, and recommended Communications Minister Steven Joyce accept Vodafone’s and Telecom’s proposal to voluntarily cut the fees over the next four years. Since then, Joyce asked the regulator to reassess its position after Vodafone introduced a pricing plan that gave customers unlimited calls to any other customer on the same network and fixed-lines for $12 a month, which the regulator subsequently said “undermined” competition.

“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 interest of end-users,” said Ross Patterson, Telecommunications Commissioner.

“While a plan like Vodafone’s Talk Add-on, which has now been withdrawn, might provide short-term benefits to consumers on larger networks, in the commission’s view, such plans are likely to result in longer term detrimental effects on competition,” he said.

The regulator recommended Joyce accept the phone companies’ offer to lower termination fees to 6 cents by 2014 in a split decision. Commissioner Anita Mazzoleni, who had taken the lead on telecommunications issues during the absence of Patterson, giving a dissenting view, after previously shooting down submissions from Telecom and Vodafone, saying they fell short of the regulator’s target.

In its report, the commission said the Vodafone plan, though it was withdrawn as soon as regulation reared its head again, heightened concerns the incumbents would introduce plans involving an on-net aspect to stem any potential losses to new clients, and would be “detrimental” to the market long-term.

“While the Talk Add-on plan has been withdrawn by Vodafone, its offer into the market demonstrates the kind of behaviour that a large incumbent can undertake as long as MTRs remain at a level contained in the final undertakings (put forward by Telecom and Vodafone),” the commission said in its report.

The Commerce Commission shot down a proposal from Telecom and Vodafone that it rely on monitoring to identify any problems with future on-net discounting, saying it would recreate the competition concerns that sparked the investigation into mobile termination rates, and would see a long delay before any “benefits of regulation would be realised.”

Joyce said he intends to make a decision in a “timely manner” and is accepting submissions on any matters that have not already been raised in previous feedback to the commission or on any relevant information not addressed in the regulator’s report.

Shares in Telecom climbed 1.6% to $1.93 on the NZX today, and have tumbled almost 24% this year.

Businesswire.co.nz

Comments from our readers

No comments yet