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2degrees slams ComCom recommendation

22 Feb 2010

[UPDATED - Vodafone, Telecom, TUANZ reaction] The Commerce Commission has “squandered a golden opportunity” according to 2degrees regulatory and commercial manager Bill McCabe.

He’s reacting to the Commission’s recommendation against regulation of Mobile Termination Rates – the fees mobile network operators pay each other to terminate calls on their networks. It was a split decision with Telecommunications Commissioner Ross Patterson and Commissioner Gowan Pickering against regulation and Commissioner Anita Mazzoleni in favour.

Patterson says “the long-term interests of consumers will best be served by applying the least intrusive means to address the competition concerns identified in the investigation.”

Vodafone and Telecom have agreed to drop the mobile termination rates from 16.47c to 6c by 2014 - this is below the Commission’s own cost-based benchmarks of between 3.96c and 4.90c. For texts, Vodafone and Telecom have pledged to reduce the MTR from 9.5c per text to zero cents where traffic is within 7% of balance, 2c per text for traffic balances of 7% to 12% and 4c per text for traffic imbalances in excess of 12%.

2degrees have fought alongside user group TUANZ for regulation and last year formed the Drop the Mate campaign. They argued that the MTRs a new entrant must pay the incumbent operators is a barrier to new competition in the mobile market.

In an email statement McCabe agrees with Mazzoleni’s dissenting view. “Today is a very disappointing day for New Zealand mobile users. After much delay, the Commerce Commission appears to have squandered a golden opportunity to finally bring New Zealand mobile prices into line with the rest of the developed world.”

Meanwhile Vodafone and Telecom have come out in favour of today’s recommendation.

Vodafone released a statement from general manager of corporate affairs Tom Chignell praising the outcome as “pragmatic”.

“We have always preferred commercial outcomes to regulation.  New Zealand’s rates are broadly in line with Europe’s rates already and through this, and the previous investigation, the Commission has managed to elicit massive voluntary reductions in termination rates for voice and SMS.”

Telecom’s statement from group general counsel Tristan Gilbertson says the telco is pleased with that the Commission is recommending the Minister accept Telecom’s and Vodafone’s alternative toregulation.

“As an operator and investor we have made a concerted effort to take the lead on facilitating a commercial resolution and we are encouraged by today's recommendation approach” he says.

“This issue has been under debate for nearly seven years now, and we are encouraged by the certainty offered to the industry by this recommendation.

Finally, TUANZ – the last of the main protagonists in this issue to release its statement today - is “surprised and disappointed” by the recommendation. CEO Ernie Newman says the Commission has got it wrong.

“The process leading to the voluntary undertakings demonstrated the breathtaking gap between the actual cost of terminating calls from competing networks, and the amount the two major operators have been charging. While the reduction of about 80% appears generous on the surface it is still insufficient to address the huge barrier to competition posed by these excessive charges.

“It’s hard to see how a dominant mobile operator that sells SMS text messages on the retail market for about half a cent each, can be allowed to charge its competitor several times that amount to receive one. That doesn’t seem to us to fulfil the test of encouraging competition in the long term interests of the end user. It entrenches the dominance of the two large networks to the detriment of smaller players and new entrants.”

ICT Minister Steven Joyce is calling for submissions on the recommendation.