Vodafone, 2degrees unhappy after Commerce Commission report

Two big telcos have criticisms following the release of the Commerce Commission’s first mobile market monitoring report yesterday.

The watchdog has promised further regulation if recent regulation of wholesale network pricing doesn’t result in better deals for customers.

Vodafone: too vague
But for Vodafone general manager of corporate affairs Tom Chignell, it was too loosey-goosey.

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

2degrees: too slow
2degrees’ point man on regulatory issues, Mat Bolland said that, “At the current speed of change, consumers in New Zealand will have to wait at least six more years before they can enjoy the any-net calling and texting freedom enjoyed by consumers in the UK today,” Mat Bolland said.

The mobile newcomer has called on the commission to regulate so-called on-net and off-net pricing, which sees customers charged more for making a call or txt to someone with a different mobile phone company.

“Kiwis should not have to worry about paying more to call or text friends and family on a different mobile network.”

2degrees maintains that offering discounts for on-net calls or txts (that is, to customers on the same network) is a barrier to new entrants, who don’t have the customer scale to offer such deals.

Vodafone's Mr Chignell gibes that in the voice calliing market, "Ironically, the only real development has been the introduction by 2degrees of a business closed user group plan," (2degrees' new business plans offer free calls to others in your company on the same plan.)

A long way to go - but toward what?
In May, the watchdog – prodded by Communications Minister Steven Joyce – mandated cuts to wholesale pricing as it regulated mobile termination rates (MTR, or what one phone company charges another when a call or txt from a rival connects to its network).

Telecommunications Commissioner Ross Patterson has threatened further regulation if the MTR cuts don’t result in better deals for customers (although the commission can’t directly regulate retail pricing).

To make the threat more concrete, Dr Patterson introduced a monitoring system, which requires Telecom, Vodafone and 2degrees to supply revenue, pricing and customer numbers data to the commission within 20 working days of the close of each month.

The commissioner was particularly looking for the difference between the cost of calls within a network and between networks to narrow (Vodafone, and to a lesser extent Telecom, offer steep discounts for calling or txting customers on the same network; 2degrees claims the practice discriminates aginst new competitors).

The first public report, for May to July, found that it had.

The price difference between on-net calls and off-net services fell by 4.4% for mobile calls and for 3.4% for txt messages.

Cross-network traffic increased by 1.2% for mobile calls and by 2.9% for txt messages. 

Telecommunications Commissioner Ross Patterson said, “While these early trends are promising, and are definitely heading in the right direction, there is still a long way to go.”

For Vodafone’s Tom Chignell, the question is: a long way to go toward what exactly?

Wrong focus
"It's good to see the trend is in the right direction for both voice and SMS [short message service or txt],” Mr Chignell said.

“[But] we should not confuse 'growth in ratio of off-net traffic' with 'growth in off-net traffic' as the commission appears to have done.”

There has been a big increase in the absolute amount of off-net txt (and to a lesser extent calls). But on-net has been growing strongly as well, so the on-net to off-net ratio hasn't moved much

"The underlying flows of off-net traffic are quite different with dramatic increases in volume - at least from Vodafone's perspective. For example, for the three months from April to July this year, Vodafone experienced massive growth in off-net volumes for SMS. The compound annual growth rate for SMS volumes is well over 250%," the corporate affairs GM said.

"The reality is that on-net volumes are also growing" Mr Chignell said, citing his company's TXT NZ, TXT5000 and new Smart plans.

As the largest mobile operator, Vodafone was also the net beneficiary before MTR regulation kicked in.

Its UK parent company recently blamed the regulation for a fall in revenue.

Telecom cuts
A spokeswoman for Telecom said the company had made several changes to its plans on the eve of MTR regulation, including cuts to fixed-to-mobile calling rates on May 1.

And on August 1, Telecom launched its new Total Home Mobile plan. "This new plan includes a sharp 29 cents per minute rate when calling from a nominated XT mobile to landlines or mobiles on any network in New Zealand. Fixed-line calls to Telecom mobiles cost 29 cents per minute, while fixed-line calls to other mobile networks cost 38 cents per minute," said the spokeswoman.  

"Alongside sharp calling rates, the new plan also includes 20GB of broadband data at home for $99 per month for customers in Auckland, Wellington and Christchurch, and $109 per month for customers elsewhere in the country."

The carrier has also introduced a new on-net plan.

"At the end of July, we launched My Favourites for your home phone. If you have a person that you call often on their Telecom mobile or landline number, you can make them a favourite and call them as often as you like for only $6 per month, per number (up to three people)," the spokeswoman said.

The wholesale cuts
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 MTR.

• 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

RAW DATA: The full report is on the Commerce Commission's website here.