Joyce sets stage to regulate mobile charges

UPDATE: ComCom issues brisk timeline for mobile rethink

Seemingly prompted by an aggressive new Vodafone plan, Communications Minister Steven Joyce has asked the Commerce Commission to reconsider its recommendation not to regulate mobile termination rates (what one phone company pays another when a call or txt is received on the other’s network).

On February 22, in an unusual split decision, the watchdog recommended the minister accept voluntary undertakings from Telecom and Vodafone as an alternative to regulation. The pair offered similar cuts to those outlined in a commission draft, but phased in more slowly.

But earlier this month, Vodafone – perhaps inadvertently – put the cat among the pigeons.

The telco launched a killer deal on April 14, offering 200 minutes of calls to any landline (including competitors), or another Vodafone mobile customer for $12 a month. It advertised the new Talk add-on on its website as providing 6c a minute calling.

Vodafone said the new $12 plan was not a so-called “on-net” deal, because although mobile calls had to be to fellow Vodafone customer, landline calls could be to a Telecom subscriber, or all-comers.

A second look
Nevertheless, the minister requested the commission’s view on whether Vodafone’s $12 plan was “material” to concerns identified in the commission’s final report relating to the issue of whether smaller operators could compete with Telecom’s and Vodafone’s on-net retail rates.

2degrees has long maintained that on-net deals (discount rates for calling or txting others on the same network) can be used in concert with what it calls high termination rates to block a new entrant.

Last week, the commission told the minister Vodafone’s $12 was “material.”

Now, in perhaps the penultimate act of this elaborate theatre, the minister has asked the commission to reconsider its recommendation not to regulate.

It’s seems likely he’s setting the stage for regulation.

Gap widening
2degrees chief commercial officer Bill McCabe told NBR he welcomed today's development.

Mr McCabe said with its decision to recommend voluntary undertakings, the commission was looking for the differential in pricing between on-net and off-net pricing to narrow.

Instead, Vodafone's $12 deal had widened the differential. Mr McCabe said it meant Vodafone was charging up to 15 times as much for off-net mobile calls to Telecom or 2degrees customers as it was for mobile calls other Vodafone customers.

Given Vodafone had said regulated MTR could cost it up to $8 million a month, even a brief delay would be in the incumbents' favour, Mr McCabe said.

However, he hoped the minister would now wrap things up quickly.

At the Tuanz Telecommunications Day conference in Wellington last week, Mr Joyce would only say he would make a determination on MTR regulation faster than his Labour predecessor. That is, in under a year. Most attendees hoped he was joking.

Around and around. And around.
Vodafone and Telecom have argued that the Commerce Commission can only regulate wholesale rates. In Australia, MTR cuts did not flow through retail pricing.

Analysts have told NBR that the pair would probably not try that on here, given it would invite further regulatory scrutiny.

Complicating matters, Telecom and Vodafone's respective array of on-net plans does not seem to have obviously hindered 2degrees' launch, with the newcomer scoring 206,000 active customers (around 4.5% of the market) in its first 180 days, exceeding all expectations. To cap the irony, 2degrees recently launched its own on-net deal.

Further Telecom and Vodafone have argued there is no correlation between countries that have high or low MTR, and countries with high or low mobile calling rates. Each side has produced rival presentations, each focusing on different plans, different angles and even different moments for picking an exchange rate.

Vodafone has also repeatedly goaded 2degrees to reveal the terms of their secret MTR deal, which favour the newcomer on several levels not disclosed in its public droptheratemate.co.nz campaign.

2degrees still won't comment, but NBR has published terms of the deal here.