Tuanz chief executive Ernie Newman says mobile termination rates add $300 a year to everyone’s phone bill. Each year, he says, Telecom pays Vodafone a net $73 million in MTR fees, but doesn’t complain because “they even out the money out elsewhere”. Mr Newman calls the money “an industry slush fund” and last week challenged telcos to agree on a self-regulatory fix before the Commerce Commission steps in.

The Commerce Commission set to rule on mobile termination rates this week - and with it potentially reshape our mobile landscape.

Speaking at the 10th annual Telecommunications and ICT Summit (TelCon10) in Auckland on Tuesday, the Commerce Commission’s Anita Mazzoleni said a statement will be made on mobile termination rates (MTR) early this week.

For Two Degrees, due to launch as our third mobile network operator in early August much hinges on the MTR decision.

Termination rates are what telcos pay each other (or, in Two Degrees’ ideal universe, don’t) when calls cross between their networks.

In submissions, Vodafone had proposing to cut its MTR rate from 15 cents per minute 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 commission has proposed 7 cents MTR for mobile-to-mobile calls, and 1 cent per text.

Two Degrees wants "bill-and-keep", effectively eliminating MTR altogether.

Cheaper than OECD average
Speaking at the conference, Ms Mazzoleni was giving little away.

On the one hand, the commissioner acknowledged that progress had been made. New Zealand mobile phone calls are now 15% cheaper than the OECD average cost of similar calls, she pointed out. (a jump up the charts that hinged on a series of Vodafone budget calling plans - previously excluded because the commission argued they weren't pushed at retail - being included. Previously, New Zealand was more expensive than average).

Except when we're not
On the other, the commissioner noted that New Zealand has an unusually high rate of txting, and pre-paid plans. Both could be indicators that our mobile pricing is too expensive overall, she said.

While all parties agree that on-account plans have got cheaper, Ms Mazzoleni said that New Zealand ranks 27 out of 30 countries for prepay.

And because around half of us are on prepay plans - which cost more per minute - New Zealanders actually pay 70% more than the OECD average for their mobile calls.

The commissioner also noted that in Australia, mobiles are used for 50% of retail market (that is, non business) calls, while in New Zealand the rate is around 25%. Again, this could be an indicator that NZ rates are too high.

So on the face of it, the signs look positive for Two Degrees.

(The mobile operator plugged another speaker, UK-based economist Dr David Harbord, who offered a PowerPoint filled with Stephen Hawking-level equations that apparently proved that MTR is a barrier to competition. My abiding memory is off the sign language translator giving up and folding her arms. Dr Harbord said a major European Commission study had found bill-and-keep the best system; Vodafone's Tom Chignall responded that the EC had chosen not to implement it).

However, Ms Mazzoleni also stood firm and cool under fire when faced with criticism of the commission’s ruling on sub-loop unbundling pricing last week, which rivals, and analysts including Forsyth Barr and Craigs Investment Partners (formerly ABN Amro Craigs), saw as favouring Telecom.

That comes next, bust a move - or not
Two Degrees chief executive Mike Reynolds has criticised New Zealand mobile pricing for as being twice as expensive as Singapore, echoing an IDC comparison between here and Australia that found mobile data was half the price on the other side of the ditch.

However, Two Degrees can only bust the market open if the commission comes to the party on MTR, Mike Reynolds told NBR.

The new telco will launch in August regardless of how the commission rules on MTR, Mr Reynolds said. But without a favourable determination, it will be a case of me-too pricing.

The Two Degrees boss fears that recent moves by Telecom - such as XT’s OneRate pricing, which charges a single rate for calls, whether they stay on its network or terminate with competitors - are an attempt to buy-off the commission, convincing it that no more change is necessary. Ms Mazzoleni did note “Recent changes to retail prices are evident following the launch of XT [but] it is not yet known how extensive this will be - particularly with incumbents indicating that competition may be focused around service differences.”

Mr Reynolds is backed by the Telecommunications Users Association, which says high MTR contributes to New Zealanders paying $300 too much a year for mobile calls.

Telecom and Vodafone have been reducing MTR in line with self-regulatory legal deeds they signed to head-off a similar commission investigation last year.

The pair say self-regulation is better because it directly impacts on retail prices (the commission can only rule at the wholesale level). They point to the fact that across the Tasman, lower MTR has been mandated by the ACCC, but Telstra has failed to pass on the savings to customers.

Telecom and Vodafone also dispute whether there is any direct correlation between MTR - however it is set - and actual retail price levels.

Roaming ruling
Ms Mazzoleni - who in the prolonged absence of telecommunications commissioner Ross Patterson has become the public face of the commission on telco issues, indicated there will also be a ruling next week on domestic roaming. Again, this is a key area for Two Degrees, whose customers will roam on Vodafone’s network when outside its own network in Auckland, Wellington and Christchurch (read: Vodafone hits mobile review with heavy duty legal threat).

At TelCon10, Vodafone's GM of corporate affairs, Tom Chignell, once again hinted that the terms of the commercial roaming agreement Two Degrees' has struck with his company are actually pretty good, but reiterated that they're confidential.

Like MTR, this will help reshape our mobile market.

Without a favourable ruling for Two Degrees, our new dawn in mobile competition will turn into just another drizzly Monday morning.

Home zone alone
It is not expected that the commission will rule on a third crucial issue - so-called home zones that allow a mobile number to be used at landline rates when inside a designated area - for at least nine months.

Relations between Two Degrees and the commission became strained earlier this month as Ms Mazzoleni sent the mobile operator an unsually letter criticising its failure to take advantage of a cell site co-location rights negotiated by the watchdog on its behalf.