Telecom and Vodafone have bitten back against yesterday’s Commerce Commision report saying they charge too much for calls that cross between their networks. But Tuanz says the watchdog is right on target.

“The cost-based figure the commission has calculated for mobile termination is around 9c a minute less than Telecom and Vodafone are currently charging,” says Telecommunications Users Association (Tuanz) chief executive Ernie Newman, who represents around 500 corporate customers.

“That means for example, a user who spends (conservatively) 10 minutes a day on calls from their fixed or mobile phone, to somebody’s mobile, is incurring $300 a year in excess charges that are way above a reasonable rate of return for the mobile operators.”

If the commission accepts Telecom and Vodafone’s “proposal of a very slow glide path down to 11c between now and 2014, such a user would incur around $1300 in excess charges over that time."

Yesterday, the commission proposed a rate of 7c a minute for mobile-to-mobile and fixed line-to-mobile calls, and 1c a text.

In submissions, Vodafone had proposing to cut its MTR rate from 15cpm to 11cpm for voice calls between now and 2014, and trim its txt rate from 9.5c to 7c. Telecom said it would cut its voice rate from 16cpm to 10cpm and introduce a flat rate of 3.5c a text.

The two telcos will now try to hash out a compromise with the commission to avoid further regulation.

Deeds, not words
Vodafone regulatory affairs manager Richard York says that looking across OECD countries as a whole, the level of mobile termination rates (MTR) bear no relation to who has the cheapest mobile plans.

MTR is just one component of the cost of a call. The ACCC in Australia (like the Commerce Commission here) can only regulate wholesale MTR. In Australia, that arrangement saw Telstra slash its MTR rates, but only pass a fraction of the saving on to the customer.

Mr York cites a November 2008 ACCC report that says: “The ACCC is disappointed it appears there has been no significant reduction in fixed-to-mobile prices has emerged [sic] despite earlier expectations … Indeed, the Commission has observed an increase in Telstra’s residential FTM retail prices since 2007."

By contrast, the voluntary legal deeds that Telecom and Vodafone signed to forestall the ComCom’s last MTR investigation do not pledge to take MTR rates as low, or as fast, as those in Australia, but because they apply to retail rates, 100% of the savings would be passed on, says Mr York.

Reynolds: Oz investigating deeds
Telecom chief executive Paul Reynolds echoes Mr York’s preference for the 2007 deeds: “We continue to believe that the MTR Deed we agreed with the government, which delivers rates at the mid-point of cost-based international benchmarks, will deliver better outcomes for New Zealanders than regulation ever will. This is supported by comments made by the ACCC in Australia which has suggested that Australia should look at introducing similar deeds.”

Dr Reynolds points out that last week the ACCC labelled 6c per minute as “unrealistically low.”

Bad news for NZ Communications
While Telecom and Vodafone are both kicking back against the ComCom's request for them to sharpen their pencils and come back with cheaper MTR proposals, both telcos are happy about one outcome.

"Vodafone is happy the commission has put bill-and-keep on the back burner," says Vodafone external communications manager Paul Brislen.

Bill-and-keep –where MTR is eliminated in favour of the party that initiated the call paying all costs – has been the cornerstone of soon-to-launch third mobile operator NZ Communicatons' regulatory (and perhaps commercial) strategy.

Txt r3g'n
Vodafone is less thrilled about the ComCom's proposal to regulate text messaging.

"I fail to see where there’s market failure in the txt space. Hundreds of millions of txts are sent in NZ every month. There is no need to regulate this area.

"There is only one country in the world that has regulated SMS termination rates (France) and it has dropped its rates to 3.5 EUcents/txt (roughly 7c/txt). The commission has instead suggested it should be 1c/txt."