itb-nz logo
Story image

ComCom cuts mobile termination rates - Updated

05 May 2011

Good news for the 4.7million Kiwi mobile subscribers this morning; the Commerce Commission released a decision that wholesale mobile termination rates are to drop, meaning reductions in call and text messaging costs for consumers.

Mobile termination rates are the prices charged for carrying a call on another network.

"These changes are intended to address significant competition problems in the wholesale mobile market which have resulted in high retail prices - particularly for prepay customers - a low number of mobile calls and high rates of people switching networks, compared to other countries,” said Dr Ross Patterson, Telecommunications Commissioner.

The Commission has determined that termination rates for mobile calls will drop to less than 4c by April 2012, a cut of around 10c a minute, with further reductions due.

Termination rates for text messages will drop to .06c from 6 May, 2011.

The full report can be found on the Commerce Commission website.

Photo credit: Joi Ito via Flickr

Update: Vodafone has released a statement calling the termination rate pricing decision "extreme".

"The Commission has taken arbitrary benchmark rates which are far below cost. The 4 cent per minute voice rate in New Zealand looks extreme in comparison to current termination rates in Australia at 10c and 11c in Europe.  It is half the rate indicated by the only available estimate of cost in New Zealand which was provided to the Commission during the STD process.  SMS is unregulated in most countries but the Commission has chosen to regulate and has set a cost which is around a third of our best estimate of cost."

Update 2: Also chipping in is 2degrees, which welcomes the Commission's decision. In a statement released today, chief exec Eric Hertz said the decision is a smart one that acknowledges that higher charges for cross-carrier calls and texts damage competition.

"This should be the beginning of the end of deals which penalise consumers for calling or texting other networks," he said.

This is an interesting diversity in responses, since 2degrees' business model has always been to charge customers a flat rate for calls and texts across any carrier - and in doing so has successfully won a chunk of business away from its rivals. In March, Stuff reported that 2degrees customer base almost tripled in the 12 months prior to March 2011.

Telecom is sure to come out with a statement later today, but it's unlikely they'll share 2degrees' position.

Update 3: Telecom sits on the fence with its statement on the regulated price cuts, instead preferring to focus on what it already has on offer and the assertion that its prices are already reasonable.

"In recent weeks we have already dropped our mobile and fixed-to-mobile calling rates, and Telecom will continue to deliver customers great value through a world-class nationwide mobile network, a wide range of flexible plans and the best handsets on the market," said Telecom's retail chief exec Alan Gourdie, in the statement.

Update 4: The Wall Street Journal reports that Vodafone - with 50% of the mobile market - will be the big loser of the rate cute and will likely seek a review, while Telecom will come out better off as it won't have to pay so much to its rival.