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Spark pushes ComCom to wrap up mobile market study quickly with narrow probe

Friday 6th October 2017

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Spark New Zealand, the country's second-biggest mobile carrier, kicked off its response to the Commerce Commission's probe into the mobile market, urging the regulator to keep it narrow and brief to avoid regulatory uncertainty for investors. 

The commission today released the terms of reference into a study of the mobile market, which aims to get a better understanding of how the market is developing and where there may be some emerging competition issues. The regulator expects the study to identify how customer preferences are evolving, and how carriers are responding to those shifts and new technologies. It also will consider the impact of those trends and whether any regulatory tools could be used for the long-term benefit of end-users. 

The regulator said the study's context was that "potential competition and regulatory questions in mobile markets have been accumulating for some time, for example, as a result of fixed-mobile convergence - both technically and as a result of evolving consumer preferences."

That fixed-mobile convergence is becoming increasingly testy between Spark and network operator Chorus, where Spark is aggressively pushing customers to switch from copper-based services onto the retailer's fixed wireless, sidestepping the cost for wholesale access to the network. 

The commission will meet with interested parties and submissions on the scope of the survey are open until the end of November. 

Spark got in early making a statement to the stock exchange that it didn't see a case for new mobile regulation given the three rival firms in the domestic market, and that the current settings worked. 

"We would caution that unnecessarily broad market studies may create a perception of regulatory uncertainty for investors, especially where there is no obvious market failure or policy concern to explain them," regulatory affairs general manager John Wesley-Smith said in a statement. "We will be asking the commission to consider early in its process whether it can identify any genuine indicators of market failure that might justify further investigation given the level of competition and significant investment programmes already in place." 

Investors were critical of commission's handling of fixed-line regulation after Chorus was spun out of Telecom Corp, now Spark, accusing the regulator of giving New Zealand an international reputation for an extreme and unpredictable regulatory framework.

"It would be in no-one's interest for there to be a repeat of the regulatory uncertainty we've seen played out on the fixed side of the New Zealand telecommunications sector over the past decade," Wesley-Smith said. Spark generated $1.2 billion of sales through mobile in the June 2017 year, about a third of annual revenue. 

A spokeswoman for Vodafone New Zealand said the country's biggest mobile carrier will "work constructively with the commission to help ensure the right regulatory settings are in place for the future", while a spokesman for Two Degrees Mobile said it wasn't something it was concerned about. 

The mobile market hasn't always been clear sailing for the carriers, with Spark and Vodafone New Zealand waging a protracted battle with the regulator over cutting mobile termination rates - fees charged to rival companies for ending a call on their network. In 2011 the commission regulated prices cuts for the fees and led to a sharp drop in retail prices. 

Earlier this week the regulator released the summary of findings into a national roaming agreement between Vodafone and 2Degrees, which showed nothing of concern in the current contracts. However, earlier variations, which have since been amended, raised significant concerns in that they "enabled Vodafone to invoke sanction against 2Degrees should the commission commence an investigation into national roaming, and also allowed Vodafone to apply retrospective sanctions if the commission initiated such an investigation because of some action taken by 2Degrees." 

The regulator chose not to pursue the issue, but said if similar anti-competitive clauses were to resurface it would reconsider its position. 


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