In its reconsideration report issued today, the Commerce Commission has recommended under the Telecommunications Act that the Minister for Communications and Information Technology regulate mobile termination access services (MTAS), and not accept undertakings from Telecom and Vodafone.
“The Commission considers that cost-based mobile termination rates, when compared to the offers in the undertakings, will better promote competition in the mobile market and will be in the best long-term interests of end-users,” said Dr Ross Patterson, Telecommunications Commissioner.
“While a plan like Vodafone’s Talk Add-on, which has now been withdrawn, might provide short term benefits to consumers on larger networks, in the Commission’s view, such plans are likely to result in longer term detrimental effects on competition in the mobile services market,” said Dr Ross Patterson. “In the long term, the Commission expects that its recommendation of regulation will ensure that all mobile users will benefit from greater competition, which is expected to result in access to more competitive prices and services.”
“For the first time, retail plans such as Talk Add-on introduced a low on-net tariff to a very broad customer base of a large existing network. Faced with such plans, a small entrant paying the wholesale mobile termination rates contained in the undertakings would be likely to incur significant losses and therefore be unable to compete against the large networks,” said Dr Patterson.
As the report is now with the Minister, the Commission will be making no further comment.
The Commission’s final reconsideration report and associated documents are all available on the Commission’s website at www.comcom.govt.nz/mobiletomobiletermination
Mobile termination prices are the wholesale charges mobile phone companies charge for terminating calls or texts from other fixed or mobile networks.
Undertakings. Under the Telecommunications Act 2001 (the Act), parties can submit undertakings, which are an offer of terms and conditions for the supply of a service as an alternative to regulation.
Requirements of the Telecommunications Act. The Act requires that the Commission makes a recommendation which best promotes competition for the long-term benefit of end users.
Reconsideration of Commission’s recommendations. Under clause 6(2)(b) of Schedule 3 of the Act, the Minister can require the Commission to reconsider its recommendation or any aspect of its recommendation, for any reasons specified by the Minister.
MTAS investigation. On 6 November 2008 the Commerce Commission commenced an investigation under Schedule 3 of the Act into mobile termination access services (MTAS). The MTAS incorporates mobile-to-mobile voice termination (MTM), fixed-to-mobile voice termination (FTM) and short-message service termination (SMS). The investigation considered whether these services should become regulated services under Schedule 1 of the Act.
On 22 February 2010 the Commission recommended that the Minister accept undertakings from Telecom and Vodafone as an alternative to regulation. In that recommendation the Telecommunications Commissioner and Associate Commissioner Pickering considered that the competition concerns that had been identified at that time would be addressed by Telecom and Vodafone’s undertakings, while Commissioner Mazzoleni did not agree with that view.
In April 2010 Vodafone launched a new Talk Add-on product offering up to 200 minutes to Vodafone New Zealand mobiles and landlines for $12 a month for certain pre-pay plans. This plan is promoted on Vodafone’s website as “just 6 cents a minute to Vodafone NZ mobiles and landlines in New Zealand”. This product has subsequently been withdrawn by Vodafone.
In April 2010, the Commission invited the Minister to take account of this new Vodafone product, Talk Add-on, in his assessment of whether Telecom’s and Vodafone’s final undertakings should be accepted, or whether it was appropriate to request the Commission to reconsider its recommendation in light of the potential impact of Vodafone’s new Talk Add-on product.
On 26 April 2010, the Minister requested that the Commission reconsider its earlier recommendation that Telecom and Vodafone’s final undertakings should be accepted. The Minister requested that the Commission consider the implications, if any, of any relevant retail offers on the Commission’s recommendation that the Minister accept the undertakings put forward by Telecom and Vodafone. Retail offers considered are those that have been released since the Commission sent its report to the Minister on 22 February 2010, or that were released before the Commission finalised its reconsidered recommendation.
On 27 April 2010 the Commission announced its process for reconsidering its recommendation following a request from the Minister for Communications and Information Technology under the Telecommunications Act 2001.
On 12 May 2010, the Commission released its draft reconsideration report and asked for submissions and cross-submission on the draft report. Nine submissions and five cross submissions were received.
The reconsideration focused on the Commission’s recommendation in the Recommendations and Reasons section of the Final MTAS Report issued in February 2010, and all considerations required under the Act. Other sections of the Final MTAS Report, including findings on market definition, the benchmark set, the factual and counter-factuals and qualitative and quantitative analysis were not the subject of the reconsideration.
If the Minister, following any consultation process he undertakes, accepts the Commission’s recommendation, then Schedule 1 of the Telecommunications Act will need to be amended to include mobile termination access services. The Commission is likely to then commence a standard terms determination process for the MTAS and, if so, expects that this process could be completed in a timely manner.