Telecom offers to halve MTR ... but much slower than the ComCom wants

Last time the Commerce Commission tried to regulate mobile termination rates, in 2007, Telecom and Vodafone headed it off by selling a voluntary commercial agreement to David Cunliffe. Today, Telecom is trying to kick-start a similar deal.

On June 30, the Commerce Commission issued a draft determination on mobile termination rates (what telcos pay each other when calls cross between their networks). It called for MTR on voice calls to immediately halve to 7.5 cents per minute on voice calls, with further cuts taking it to 3.8 cents by 2015.

Today, telcos have delivered their revised MTR submissions as part of an extended review process that will, eventually in the New Year, see communications minister Steven Joyce decide whether, or not, to accept the commission’s recommendation.

As in 2007, the commission has said that it will revisit its investigation if telcos are able to reach a commercial agreement among themselves to lower MTR.

Today, Telecom is trying to lead just such a voluntary pact.

In Telecom’s revised submission, it offers to cut MTR to 7 cents - not immediately, as the commission wants, but by 2015 - and it has challenged other telcos to agree to the same rate, and timetable.

Telecom's proposed MTR for fixed line-to-mobile and mobile-to-mobile calls:
Up to March 2010: 15 cents per minute
April - Dec, 2010: 12cpm
Jan -Dec, 2011: 10.6cpm
Jan -Dec, 2012: 10cpm
Jan -Dec, 2013: 9cpm
Jan -Dec, 2014: 8cpm
Jan 2015 on: 7cpm

At base, Telecom is saying that a gentler glide path is needed because of the capital demands of building its XT network:

“We recognise that mobile termination rates need to come down over time, and our proposal would represent a significant decrease on today’s rates, and a further cut to the rates we had already agreed in the deed we signed with the Government,” said Telecom chief executive Paul Reynolds.

“At the same time, it is critical that Kiwis continue to have access to world class mobile services at great value across the board. We believe the price path we have proposed balances those two imperatives better than the proposed regulation would, and better serves New Zealanders. Telecom has decided to take the lead on this issue, and we are challenging the other mobile operators to match our offer.”

The legal deed that Mr Reynolds mentioned was signed by Telecom and Vodafone in 2007. Then communications minister David Cunliffe accepted the voluntary commercial agreement, which has seen MTR fall from over 20 cents to the 14.5 - 15 cents it sits at for voice calls today.

In their original submissions, both Telecom and Vodafone called for a reduction to MTR of 11 cents by 2015. The commission, which argues that the true wholesale cost of MTR is lower, said that would inflate the average mobile phone user’s bill by $1300 over the period.

2degrees unlikely to sign on
If its revised submission today is anything to go by, 2degrees is not about to sign on to Telecom's gentle glide path to 7 cents per minute by 2015. The telco reiterated its postion that its is "a critically urgent requirement for MTR to fall immediately to a level not exceeding cost".

In fact on txt, 2degrees goes further than the commission, which has called for a reduction in MTR to 0.5 cents per txt by 2015 - and an immediate cut from today's 10 cents to 3.8 cents.

2degrees says MTR on txt message should immediately drop to between 1 cent and 0.1 cent per minute, which it sees as the true wholesale cost - and the cut should occure as soon as possible.

Telecom has proposed a cut to 3.5 cents per minute, but without a time table. A spokesman said he was unaware of any regulated rate in the world tht was lower.

Vodafone says it is still analysing other telco's submissions, including Telecom's MTR challenge.

Earlier today, Vodafone made its own play, announcing that it would offer the same cut-price MTR deal offered to 2degrees to any new market entrant. However, Vodafone says it can’t make its killer MTR rate public until 2degrees also agrees, given the pair’s confidentiality agreement.

And in keeping with the day's theme of trying to make the commission happier, Telecom Wholesale headed off its investigation into home zone pricing by reaching a surprise deal with 2degrees.