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Skinny, Vodafone moves see watchdog delay market monitoring report

The Commerce Commission has delayed a major 12-month review of competition in the mobile market, promised by previous Telecommunication Commissioner Ross Patterson in April.

“We indicated in April that we would produce a comprehensive report [in July] on progress over the past 12 months. However, since April, there has been a new entrant into the market – Skinny Mobile – and an announcement about the potential acquisition of TelstraClear by Vodafone. The Commission will therefore continue to monitor the mobile market to assess the impact of these changes,” new Telecommunications Commissioner Stephen Gale in a statement.

The watchdog did not immediately respond to a query about a target date for its next comprehensive report.

It did release a quarterly summary of price and usage trends from February to April (read the full version here) - which one Vodafone manager was quick to seize on, telling NBR prices had fallen dramatically. Corporate affairs manager Tom Chignell told NBR that was a challenge for an industry that was also expected to build new networks, and get out its wallet for the 4G auction in December.

Since regulation of wholesale mobile network pricing was introduced in May last year (see rates end of article), Telecom, Vodafone and 2degrees have been required to submit customer, calling and financial data to the commission within 20 days of the end of each month.

The monitoring was introduced because of fears the regulated wholesale price cuts would not flow through to the retail market, which the commission has no power to control.

2degrees also maintained that regulation of mobile termination rates – the fees carriers pay each other when calls or txts cross between their networks – was not enough.

The relative newcomer also wanted regulation of “on-net” deals like Vodafone’s Best Mates, which it says reward customers for calling others on the same network, making life harder for new market entrants to gain a critical mass of customers.

The commission disagreed, but did say it would monitor the major mobile players monthly and publish reports every three months.

Mr Patterson had said more regulation could follow if the watchdog did not see an increase in calls and texts between customers on different phone companies – and Vodafone has responded by tweaking its packages to allow more off-net calls in its special deals.

Some progress
Dr Gale did release an interim update today, saying: "Between February and April 2012, cross-network traffic increased 1.4% for mobile calls and 1.6% for text messages. For mobile calls, the on-net and off-net price difference decreased by 3.3% and by 6.8% for text messages.

“Since the commission introduced the draft mobile termination access service (MTAS) standard terms determination in December 2010, cross-network calls have increased from 15.0% to 21.8% of all calls and cross-network texts have increased from 15.5% to 30.8%.

 “It’s pleasing to see a reduction in the price difference between calling people on the same network and those on other networks. This suggests competition between the mobile operators is continuing to increase.”

Phone companies did not have immediate comment this morning.

Vodafone has previously criticised the commission’s mobile monitoring report criteria as too vague.

"It would be useful for the commission to set standards of performance that the industry can be measured against [rather than] ‘Just do better’,” corporate affairs head Tom Chignell told NBR ONLINE.

2degrees has said the process is too slow.

Mr Chignell has previously countered that with its rapid acquisition of customers (it recently claimed 950,000), 2degrees does not seem to be suffering too many barriers as a new entrant.


Wholesale mobile price cuts

In May last year, termination rates for txt messages were regulated down from 10 cents per text a 0.06 cents as of 6 May 2011 (the nominal charge is to deter spam).

The Commerce Commission, prodded by Communications Minister Steven Joyce, also mandated the following cuts to mobile voice calling mobile termination rates (the fees phone companies pay each other when a call crosses between their networks):

  • May 6, 2011: 7.48 cents/minute
  • Oct 2, 2011: 5.88 cents/minute
  • April 1, 2012: 3.97 cents/minute
  • April 1, 2013: 3.72 cents/minute
  • April 1, 2014: 3.56 cents/minute

More by Chris Keall

Comments and questions
4

So they are only charging each other 3.97c per minute... Wow. Why is competition so slow?

We are constantly ripped by all large companies in NZ - our country is so small that there is only enough market space for 2-3 big players in most industries and this always leads to duopoly gouging of kiwis hard earned money. Because our country is so small - regulation is the only answer to ensure competitive rates when compared to other larger countries with real competition. Low population is our strength and our weakness - depending on which industry you look at. Tourism loves low population for example as it promotes clean and green due to pristine environment and lack of millions of people to mess it up. Not so attractive to other industries that require economies of scale to be most profitable.

Efficient & Profitable I should have said.

Correction:

Its not the 4G auction - its the digital divided auction.

Its not (hopefully) just about cellular.