Family and youth advocates concerned about potential mobile price rises

, posted: 2-Sep-2009 14:05

Parents Inc and Youthline have released this press release and allowed me to post it here.

If there are any questions for either organisation ask them here and I'll see if we can get a response.

Media Release

Family and youth advocates concerned about potential mobile price rises

AUCKLAND, New Zealand - Parents Inc. and Youthline today spoke out on
behalf of families and young people, with concerns that the Commerce
Commission's proposed mobile phone regulation may have a negative

The organisations' key worry is that New Zealanders will have to pay to
receive mobile calls and text messages if mobile termination rates are
regulated. The Commerce Commission will discuss the topic at a
conference today.

Parents Inc. CEO Bruce Pilbrow says paying to receive calls and text
messages will prevent many families from keeping in touch, and
consequently, from keeping children safe.

"Technology is used by many families in a very positive way. For
example, young people use their mobiles to keep in touch with their
parents, no matter what. If there are additional fees imposed on
families and young people for making and receiving phone calls and
texts, this will have a negative impact on the way many families
communicate. I am concerned about anything that stands in the way of
building stronger families."

Many families use calling circles (such as Vodafone Family and Telecom
Favourites) to keep in touch while keeping the price low. Some of the
changes the Commerce Commission is considering would ban these sorts of
bundled deals, and dramatically increase prices for families.

"This would impact our most vulnerable and those who can least afford
additional costs. In this economic climate we should be looking at how
we can keep prices low rather than imposing extra fees on families,"
says Pilbrow.

Both Parents Inc. and Youthline are concerned about the other unintended
consequences of regulation, such as the potential for an increase in
text spam and text bullying. When a service is very cheap or free, it
increases the risk of abuse.

Pilbrow says, "One of the issues with young people and parents is that
the technology is growing so fast we have not had time to put boundaries
around it. Parents struggle with it, and when spam and other areas of
abuse are factored in, the issues for parents increase immensely."

Youthline CEO Stephen Bell is particularly concerned about text
bullying. "The mobile is such a personal communications device, and
teenagers in particular rush to read and respond to a text message as
soon as they hear the phone beep. Texts can easily be anonymous, which
emboldens bullies and intimidates victims. Anything that makes it easier
for bullies is of grave concern and we should take it very seriously."

Parents Inc. and Youthline are asking the Commerce Commission to think
about the unintended consequences of regulation on families and young
people when making recommendations to the government.

Other related posts:
Of termination rates and regulatory holidays
Minister recommends regulation - Vodafone's response
Vodafone's response to the Commerce Commission's report

Comment by Screeb, on 2-Sep-2009 16:07

Congrats Paul! Your FUD is working!

Comment by simon14, on 2-Sep-2009 16:18

If the MTR was lowered to a level similar to Australia’s, why does that mean Vodafone/Telecom would then have to charge their customers to receive calls? Absolute nonsense... We aren’t saying run a “bill and keep” model, so there is still no need to charge for calls received.

Both Telecom and Vodafone would have to “partner together” and both charge to receive calls for it to work. If one did it and the other didn’t, the company that did, would loose a lot of unhappy customers. So yes, they’d have to work together to push prices up in this way…

Author's note by jointhedebate, on 2-Sep-2009 16:24

If you cut our income from one source by 50% or more how do you think a company will react? This isn't in doubt - the Commission has factored it in to its model - it's called the Waterbed effect and the Commission believes we'll only try to recoup half the lost revenue.

It's not just charging more - it's reduced levels of investment in new technology. Why? Because we have to go cap in hand to VF Group and ask nicely when we want more cash to build out to 97% or add HSPA Plus or buy Ihug and in a market where we aren't returning anywhere near as much as we were or as much as another country is, we won't get the cash.

Telecom's in the same boat.

The ACCC in Australia already decided to stop reducing MTRs because it simply doesn't flow through to consumers. Instead they've said their own cost model prices termination rates TOO LOW and they won't be using it. That hasn't stopped our Commission from using it in its modelling.

There is a very real risk that we will be backed into a corner - either lower investment or increase pricing.

Neither outcome is ideal.

Comment by simon14, on 2-Sep-2009 16:32

If your income is cut by 50% from one source, are you suggesting the only way out is to put prices up elsewhere to make up for the loss in revenue?
How about not putting prices up elsewhere, still make a hefty profit and pass the savings on to the consumer? Vodafone have had a sweet deal over the past years in the NZ market, you can’t expect to keep maintaining those same sweet profits in a more competitive market into the future… can you?

Comment by DarkShadow, on 2-Sep-2009 16:40

"When [text messaging] service is very cheap or free, it
increases the risk of abuse." Oh noes! Would someone please ban TXT2000? Think of the children!

Author's note by jointhedebate, on 2-Sep-2009 17:08

@Simon14, so we aren't allowed to make a profit? Where's the incentive to invest if we can't make money from it?

If our prices have been so outrageously high for the past 15 years why is it that it's taken until this year for someone else to build a network?

Think about it - if you've got an underserved market, that's being ripped off by a dirty incumbent, surely that's prime pickings for any other provider with a bit of cash to come in and steal your customers?

And yet... that didn't happen. Why? Because it costs a lot of money to invest in NZ. Vodafone's spent $3bn over the last decade. That's a huge amount for a population this size and most companies around the world haven't come here because of that.

@DarkShadow, I don't think anyone wants to replicate the mistakes of the email market in the TXT market.

97% of the traffic on the internet is spam email. That's a huge cost to the network operators and to the customers in terms of network capacity, time, energy and effort.

The reason why spam is so successful is that scoundrels can send 60m emails a day at no real cost.

Imagine a world where your mobile phone receives 50 to 100 TXTs a day from overseas' operators offering you Viagra or diplomas or whatever the latest spam offer is. They don't need your permission, they don't even need your number, they simply programme a TXT gateway to send to all the numbers between 02x 123 456 and 02x 999 999.

The only thing stopping that is the cost. At 20c/TXT (even though that's one of the cheapest rates in the world) it's too expensive. At 1c/TXT it's too expensive.

But cut the rates dramatically to a fraction of a cent and this will become commonplace.

Don't take my word for it. Google for it. The French govt is the only govt in the world to regulate TXT rates and it's the only country in the world where TXT spam is starting to ramp up.

Not trying to scare you into a point of view - I'm trying to discuss what is actually going on around the world.

This post refers to the problem in Europe. I've seen a growing number of posts here on Geekzone from people who do NOT want TXT spam and are already getting it.

Comment by ajw, on 2-Sep-2009 18:01

All this scaremongering by Vfone. I note Vodafone NZ has not told the punters that they are the best performing subsidiary in the Vfone empire. So don't listen to all the bull VFNZ are making a huge financial killing.

Comment by Screeb, on 2-Sep-2009 18:01

"so we aren't allowed to make a profit? Where's the incentive to invest if we can't make money from it?"

That's not what he said, and you know it. Vodafone NZ make HEAPS of profit. You can afford to let some of that go, and you will still be rolling in piles of cash.

"If our prices have been so outrageously high for the past 15 years why is it that it's taken until this year for someone else to build a network?

Think about it - if you've got an underserved market, that's being ripped off by a dirty incumbent, surely that's prime pickings for any other provider with a bit of cash to come in and steal your customers?"

Because of the high barrier to entry caused by Vodafone and Telecom's efforts to maintain a comfortable duopoly. That's why it took 2degrees 8 YEARS to enter the market. But you knew that. So just stop it, OK? Most people on Geekzone are smart enough to see through your BS. You're just making yourself look stupid at this point.

Comment by Screeb, on 2-Sep-2009 18:03


"At 1c/TXT it's too expensive."

Oh, cool, then I look forward to being offered 1c/TXT casual rate from Vodafone, while still not having spam. In the mean time, 9c/TXT from 2degrees will have to suffice.

Comment by simon14, on 2-Sep-2009 19:01

"so we aren't allowed to make a profit? Where's the incentive to invest if we can't make money from it?"

Come on, don’t be silly… I never once suggested Vodafone wasn’t allowed to make a profit.

Good job at summing up those points Screeb...

Author's note by jointhedebate, on 3-Sep-2009 08:22

So can I ask a question: how would you respond if your boss came to you today and said "Simon, I think we're paying you too much. From next week we're going to cut your pay by 20%."

What would you do?

You'd reduce your outgoings, where you can.

You'd reduce your plans for a big spend later in the year or next year.

You'd try your hardest to make sure it doesn't happen but if it is you'd argue that next week is too soon, how about the end of the year.

You'd disagree with the whole idea in the first place.

You'd possibly have to get a second job or look to earn an income from a second source somehow.

That's the position we're in here. After investing in the market (and I'd say Vodafone has over-invested in New Zealand. That's my personal view and has been for years. I'm the happy recipient of it but it's always struck me as odd that a company that can buy in to India would also buy in to NZ) and reducing prices steadily and helping to introduce competition because we were told that's what was needed... after all that AND after signing a deal to sort this out for the next five years, we're still being told we're too expensive, we're out of step and sorry but you need to be regulated.

We haven't seen the Commission's workings (they've shown us one model for Fixed to Mobile but not for Mobile to Mobile or TXT or international calling), it's full of holes and assumptions, it's got a couple of facts wrong and yet the Commission is saying "that's it, that's all we're giving you".

If the regulator isn't careful it runs the risk of introducing poor regulation, something we've seen in the telco industry already with the TSO.


Comment by freitasm, on 3-Sep-2009 11:45

Basically you are saying that reducing the price of an item (SIM card) is bad because it lowers the barriers for sad low life people to get their communications means. You also say that cheaper SMS services are bad because some people may find it easier to bully others.

In reality technology provides ways around this. For example someone might use a free SIM card to play those phone calls, remove the SIM and put his other SIM card back.

Every single call in the system provides the cell site with the SIM card number, plus the handset number (IMEI). Police investigating abuse could simply ask for a warrant so that the operators could provide them all accounts who used the same handset. At some point those accounts are post paid - with valid, account verified information - or recharged either via credit card or bank link.

At this point the police can conduct their enquiries with the person responsible for this handset. Or the operator could block that handset from their network, which means automatically the abusive caller would have a much higher economical barrier to overcome - buying a new handset is not cheap and these days require some form of id - payment via credit card or EFTPOS for example.

You see? Bringing down prices doesn't mean abuse is lurking.

Comment by simon14, on 3-Sep-2009 12:24

So are you telling me that if the NZ mobile market became extremely competitive and you lost 20% of your revenue, Vodafone wouldn’t invest as much in their network?

If this is true, then Vodafone would loose even more revenue as other players would be upgrading their networks, while Vodafone would fall behind.

The beauty of competition means the consumers will get better pricing and the technologies will be implanted a lot quicker. Just look at the example when Vodafone pushed forward their nationwide 3g rollout directly because there was more competition in the market from Telecom rolling out their new network.

You can’t tell me that if we had an even more competitive market and you lost 20% of your revenue, that you would stop investing…..

Author's note by jointhedebate, on 3-Sep-2009 12:27

Not really - we're not talking about the price of a SIM card itself. We're talking about the reduction in price for a TXT message dropping to a point where spammers can take spam on TXT to the kinds of levels we see in the email world.

Let's not beat around the bush: email is broken and verging on being unfixable. 97%-99% of all email traffic is spam.

Imagine how well the network would run if all that junk email was removed? Imagine how much cost would be removed from the network providers and the end users if we removed spam at a higher level?

There is one simple reason why email spam is so popular: cost. It costs the spammer nothing to send 50m email a day.

The cost of a TXT is minimal to the customer. We have rates from zero up to 20c/TXT. NZers TXT more than most other countries and our price per TXT is one of the lowest in the world. Over 700m TXTs cross our network every month.

I value my TXTs because I know they will be for me. I haven't had any spam TXT as such but others on Geekzone have and they hate it with a passion. My mobile is far more personal to me than my email address (don't know why but it is) and I don't want to be fending off spam.

The easiest way to do that is by making it cost something so the spammer can't get started.

Mauricio, you say police could simply get a warrant and get the number that sent the TXT spam. Yes, they could. And yes, they could in the email world as well.

It's a simple matter to get the ISP to hand over the IP address of the sending machine but that's not the end of it, and getting the "phone number" that sent the TXT spam won't be the end of it either.

Most of this spam will come from overseas. Most police forces won't care enough early enough to stop it.

This isn't about a customer sending an unwanted TXT from a cellphone. This is about bulk TXTing sent by automated processes targetting multiple numbers at random.

France is the only country to regulate the TXT message market and TXT spam in France is risinig rapidly because it's so very cheap to send a TXT. I put a link in somewhere - have a look. If we can stop this now, before it becomes a huge problem, isn't that a good thing?



Comment by freitasm, on 3-Sep-2009 12:34

I am referring to SMS bullying, not SMS spam. In this case the press release posted here says that lower SMS costs may reflect in an increase bullying...

Comment by freitasm, on 3-Sep-2009 12:56

Interesting read on comments from TUANZ on how Vodafone had sponsored outhline before. The same organisation now saying cheaper SMS is bad for us.

Author's note by jointhedebate, on 3-Sep-2009 13:49

Hi Simon,

this isn't about competition - this is about regulation. I know, the Commission says the approach is about a mythical fourth network builder but frankly that's never going to happen.

This is about taking money from the mobile market and giving it to the fixed line market and assuming the fixed line players will pass that on to the customer. That also, is never going to happen. It hasn't happened overseas and it doesn't happen today in New Zealand.

How will that benefit New Zealand?
How will that benefit end customers?
How will that influence the fixed-line market?
How will that influence the mobile market?

What we're saying is that if you remove that amount of money from our business and give it to our biggest competitor, that will have an impact on what we do in the market.

At the same time all this is going on, a highly competitive mobile market is emerging. We have two and a half networks. We have eight or more MVNOs. We're the only country to be this competitive in terms of reach and scale of the networks and yet we're being told we need to regulate the industry to fix a problem that isn't there.

That's different to "you're too expensive ya bastards, lower your prices"... that's an entirely different discussion.

Author's note by jointhedebate, on 3-Sep-2009 13:52

Apologies Mauricio. Misread your post.

For TXT bullying that's really something you'll need to talk to Youthline or Families Inc about.

As I understand it, if kids have access to cheap/free/disposable SIMs the fear is that TXT bullying will increase in scale and become harder to police. But I'm no expert in these areas.

As for our sponsorships of Youthline and Families Inc, I don't think we've ever been shy about those - we do indeed fund them because we believe in the work they're doing and the outcomes they're achieving. Yes, we spoke to both of them about our fears in this area but frankly what's wrong with that?

Has Two Degrees not enlisted TUANZ to promote its Drop the Rate campaign? What about Consumer's Institute (or whatever it's called now) and the unions?

It's not something we tried to hide.



Comment by simon14, on 3-Sep-2009 15:08

"The easiest way to do that is by making it cost something so the spammer can't get started."

Regarding this point Paul made, lowering the MTR doesn't mean making text FREE, it means lowering it. Texts would still cost, so it woudl still be an expensive operation for a spammer to send out in mass.

No one has ever said make text FREE, so why make your point based on there being no cost in sending a text (like email)?

Comment by Scott, on 4-Sep-2009 03:10

Personally i think this is getting a little too PC. This "and consequently, from keeping children safe." annoys me a little. When i was a lot younger surprise surprise we didn't have cell phones and i turned out fine (well i think i did anyway =P). I think the whole lack of security is just come from parents over protective point of view. The news blows things out of proportion, that's how they make their money after all. This comment reminds me of a study i read about which basically said its more dangerous to not let you children climb tree's and run wild while they are younger. The reason behind this is when you are younger you climb a small tree, if you fall, it hurts, you learn from it. When your older its no longer a small tree, if you fall from that it could quite possibly be the end. At least if you climbed that smaller tree at a younger age you learned how to climb.

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Paul Brislen
New Zealand

You’ll have heard about mobile termination rates and how the Commerce Commission is investigating whether or not to regulate them. But what is a mobile termination rate, how does it work and why is it so important?

In this blog, we’ll try to answer your questions, tell you a bit about what we think and keep you up to date with the Commerce Commission and its process.

Recent comments

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