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Vodafone pre-pay plan 'undermines' competition

Wednesday 12th May 2010

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Vodafone New Zealand “undermined” competition with its latest pre-pay plan, and the Commerce Commission has flagged regulation is on the cards again.  

The commission has recommended regulating the fees carriers charge rivals for ending phone calls on their network in a draft report. Communications Minister Steven Joyce last month queried whether the Vodafone plan needed the commission to reassess its findings, after the regulator had previously decided to accept Vodafone’s and Telecom Corp.’s voluntary reduction in mobile termination rates over the next four years.  

In the draft report, Telecommunications Commissioner Ross Patterson and Assistant Commissioner said Vodafone’s Talk Add-on plan, which lets pre-pay customers pay $12 a month for 200 minutes of calls to any landline or Vodafone customers, “undermined” their assumptions that the phone company wouldn’t “engage in significant on-net price discounting”.

The regulators flagged new mobile operator, 2degrees, as the most at risk by the offering.  

“The commission considers the new Talk Add-on plan is likely to result in a potentially significant net traffic outflow from 2degrees,” the report said.

“This level of relative prices for off-net calls is likely to result in Vodafone subscribers making a relatively low volume of calls to 2degrees subscribers, and 2degrees’ subscribers making a relatively high volume of calls to Vodafone subscribers.” 

In February, the regulator recommended Joyce accept the phone companies’ offer to lower termination fees to 6 cents by 2014. The decision was split with Commissioner Anita Mazzoleni, who had taken the lead on telecommunications issues during the absence of Patterson, giving a dissenting view.

She had previously shot down submissions from Telecom and Vodafone, saying they fell short of what the regulator’s target. In the draft report, Mazzoleni said “vigorously competitive retail offerings must be strongly encouraged” provided they don’t hinder competition, and that regulating mobile termination rates would limit the distortions created by such plans.  

The regulator will accept submissions on the draft report until May 19 and expects to make its final reconsideration report in early June.  Shares in Telecom fell 0.5% to $2.09 on the opening of the NZX today.

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