Last week we released a new add-on called Talk that lets Vodafone Prepay customers talk for up to 200 minutes a month to landlines or to Vodafone mobiles for $12. We want to encourage our mobile customers to use their voices rather than their fingers, and their mobiles rather than their home phones.
Certainly Talk has got a reaction. A range of parties have expressed a view, including the Minister, the Commerce Commission, TUANZ, 2degrees, and the blogosphere. Even DPF himself has weighed in.
I want to make three points. First, why we are launching Talk. Second, why it is good for competition. And third, what the implications are for the Minister’s decision on mobile termination rates.
Talk is a great deal. In particular, you should buy Talk and give up using your landline. You pay too much for it anyway.
We all know that New Zealand mobile users are very keen on text messaging. New Zealand has amongst the lowest prices and highest usage for text in the world. But the same enthusiasm doesn’t extend to talking.
Our research tells us that three quarters of customers wait till they get home to make a call longer than five minutes. Talk is part of our response, letting customers get on with what they want to do with their mobiles.
This is not the only change we are bringing to prepay this year. Recently we introduced cheap international calling rates for our top destinations, but it began in 2006 with Best Mate TXT2000, $2 for 2 hours off-peak, and the introduction of Family in 2008. There is much more to come.
2degrees has argued for years that it cannot compete without a laundry list of regulatory concessions. 2degrees has not deviated from this line despite the numerous changes that have been made to accommodate it. But with several hundred thousand customers after just over six months, 2degrees is already one of the most successful new entrants in the world. I see the Commission this morning reported 2degrees’ market share at 4% as at 31 December. Five percent market share in a year would be very good performance. So 4% percent in around six months is remarkable.
The real question is not what our competitors think, but whether they can match or better Talk. Clearly they can, and they will if they think that doing so will gain them an advantage in the market.
Comparison between headline retail rates and mobile termination rates is not helpful. Operators offer lots of different products, some are higher priced, others are lower priced. All three mobile network operators offer products that are cheaper than MTRs. Some examples:
• Telecom offers calls from a Telecom fixed line to a Telecom mobile for sixty minutes for no more than a dollar. If calls are long this could easily generate a very low average price (hat tip: Steve Biddle).
• Vodafone allows unlimited calling between all connections on one business account in return for a monthly fee per connection. Clearly this also generates a very low average price if usage is high.
• 2degrees offers its customers text messaging to any other 2degrees’ customer for 2 cents a text. Under our agreement with 2degrees, we are required to pay more than four times that amount to text a 2degrees customer.
The Commission does have a cross-check between mobile termination rates and retail prices in its final report. It’s not based on the level of any particular retail plan; instead it compares industry average retail on-net mobile prices with mobile termination rates. Talk shouldn’t affect that average.
The Minister needs to decide what to do with the Commission’s termination rate recommendation. He can send it back to the Commission for more work or accept the undertakings as recommended by the Commission.
Accepting the undertakings means lower mobile prices from October. Voice termination rates would fall from 14.4 cents (already lower than the average in Europe) to just under 10 cents, and then again to just over 8 cents on 1 January with more falls over time (all rates expressed in minute plus second rounding). The undertakings cut text prices to effectively zero.
Sending the report back to the Commission for more work means termination rates stay where they are for a longer period.
The Minister’s decision is quite straightforward. His best choice is to take the money on the table now, accept the undertakings and reduce mobile prices from October. If the Commission wants to look further at retail pricing and the relationship with mobile termination rates there is nothing to stop it doing so.
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 hellonearthisman, on 23-Apr-2010 21:25
It just sounds like an AD to the COMCOM to support Vodafone costly MTR rates. MTR's are an anti-competitive and need to go.
The current MTRs are blocking people who want to deliver new SMS services (gateways).
Vodofone and the rest that play the MTR protection card should cut it out.
The MTR doesn't make any money anyway as they just play saw a $ with they other MTR player and effectively make no money.
If they post was release to more than one site, does that make it an Advert, press release or trolling.
Comment by Chris, on 24-Apr-2010 15:37
Um no, Not nearly enough minutes to last a month.
And might give cancer if using Cell Phone too much for calls.
Comment by Kyanar, on 24-Apr-2010 18:13
Intriguing, but I can't help but wonder why you'd be encouraging people to give up their landlines in favour of having solely a mobile phone. That's all well and good if everyone in the country does the same thing, and drops their landlines and mobiles in favour of a Vodafone prepaid at exactly the same time.
The reality is though, your suggestion would result in higher prices across the board for everyone. For those still on a landline (amusingly including Vodafone landlines!) this would result in incredibly high prices to call anyone who has made the jump.
For other (non-Vodafone) mobile customers, it would dramatically increase the price of calling anyone who does this as it's a cross network mobile call.
Don't get me wrong, it's a great plan - but it's still incredibly short sighted (and a bit misleading) to go around telling people to dump their landline because it costs more.
Comment by JasonDarwin, on 26-Apr-2010 10:22
What will be the price of mobile calls from October if the undertakings are accepted?
Comment by simon14, on 26-Apr-2010 11:19
Good comment @Kyanar , it's shame Paul didn't respond to it.
@Jason, prices won't go up, don't worry about that. If the undertakings are accepted, then other players in the market will reduce their prices (most likely 2d and landline to mobile toll providers). If Vodafone then want to increase their prices, then that's their decision, but it wouldn't be a very wise one.
Comment by JasonDarwin, on 26-Apr-2010 12:37
Accepting the undertakings means lower mobile prices from October.
The above statement is made by Vodafone's Hayden Glass, yet you told me earlier today there will be no change.
Who is correct you or Hayden?
Comment by simon14, on 26-Apr-2010 12:46
Also not forgetting most people need a landline to get ADSL as mobile broadband doesn't offer the same service/datacaps so that $45 charge is still payable.
I'd love to get Wireless Home Phone and i would in a heartbeat if ADSL could be purchased by itself at a reasonable price. (Naked DSL isn't that attractive in pricing)
Comment by 2degrees, on 26-Apr-2010 16:07
Kia Ora Hayden,
Thanks for your kind words about 2degrees’ success so far. We put it down to the great value that 2degrees offers when compared to the Vodafone and Telecom charges.
People who move to 2degrees tend to either save a lot of money, or get far more for their money so it’s not surprising that over 200,000 people have joined us. It’s also good to hear Vodafone respond to 2degrees’ lead and start to acknowledge the value of talking.
What I find deeply concerning though is that your article tries to explain MTRs and in many places states as fact information that is plainly wrong and risks misleading consumers and Geekzone readers.
I tend to let Vodafone’s spin merchants get away with all sorts of exaggerations – most of which are picked up by the more inquisitive and informed Geekzone community, but the scale of the misleading information that you have provided here demands a challenge and that we set the record straight.
First, the UK average MTR is 4.3 pence per minute. That’s 9.2 New Zealand cents. As you well know, virtually all countries except New Zealand charge MTRs on a second plus second basis. The 14.4c that you mention equates to 17.7 NZ cents when adjusted for per second billing (according to the Commission) and should be the figure used for comparative purposes. So, perhaps you could explain how 17.7c is less than the UK rate of 9.2c?
Secondly, it won’t have escaped your attention that Ofcom, the UK regulator has conducted a review of MTRs and proposed that rates drop considerably to 2.5 pence next year and 0.5 pence in 2014 largely to avoid the competitive distortions that favour large mobile operators under the current UK rates. That’s also relevant to your comparison with the UK.
Third, the rates recommended by the Commission are not ‘just under 10c’ from October, but 12c. And not ‘just over 8c from 1 January’ but 10c. Now, exaggerating by around 20% is not hugely significant given the disparity between the undertakings and the UK regulator’s assessment that rates should be so much lower but it does seem that Vodafone are misleading Geekzone readers unnecessarily here.
Forth, Text message prices. Complex it is, zero rate MTRs it ain’t. You say that the undertakings ‘cut text prices to zero’ but fail to point out that the rate is only zero for the network that is a net receiver of text messages and is 4c for net senders unless traffic is less than 12% out of balance. So, the price is zero if an operator is a net receiver of text messages and that operator can send incremental text messages at no cost, but an operator that is a net sender of text messages can quite quickly be paying 4c for all incremental messages. I know it’s complex but that’s the Vodafone and Telecom proposal so you should be familiar with it. We advocated real zero rate termination rates but you came up with this very odd construct.
Fifth, you complain that you have to pay 2degrees several times your retail price for text messages but fail to point out that 2degrees has tried to bring wholesale text message rates to zero – that’s the real zero, not the 4c zero that you are trying to portray, for a long time. Are you now saying Vodafone supports Bill and Keep?
It’s very interesting that Vodafone takes one position when protecting a dominant position – as is the case in the majority of Vodafone’s territories, but where it tries to enter new markets it argues for low MTRs. I’ll jog your memory if you like. Here in New Zealand Vodafone argued for zero rate termination in the local calling market in 2006 and asked for (and received) regulation to prevent Telecom from charging its customers more to call a Vodafone number than a Telecom number arguing that without this competition would be ‘hobbled’ before it could commence. Overseas, Vodafone’s most recent ‘new entrant’ mobile investment has been in Qatar where again it argued for Bill & Keep. 2degrees’ success in New Zealand is eclipsed by Vodafone’s success in the Qatari market – well done, you did a good job of arguing for a pro-competitive regulatory environment there.
Comment by Steve, on 26-Apr-2010 17:11
Hat off to Hayden. You've taken exaggeration to an entirely new level.
I didn't think you'd ever top the exaggerations you made back in 2006:
Comment by Kyanar, on 26-Apr-2010 19:53
You're assuming I'm talking about it being more expensive to call out. That's only part of what I said.
1. It would become more expensive for anyone to contact me, were I to take up Vodafone's offer.
2. It would become more expensive for me to contact anyone else, as 200 minutes is quite simply nothing. My household ran up 107 minutes of local calls last month, and we rarely ever make calls.
Pulling out my trusty calculator, let's see what it would REALLY cost to take up Vodafone's offer.
First, let's look at a household using my exact figures.
Current cost: 2x Phone, Broadband - 50GB = $180
Vodafone offer: 2x Phone - 200 minutes ($12 * 2 = $24) + Snap Naked DSL - 30GB ($90) + Snap 20GB Data Block ($36) + Offnet calling - 5 minutes ($0.89 * 5 = $4.45) + Voicemail retrieval - 10 times ($0.20 * 10 = $2.00) + Calls to Customer Service(!) - 5 ($1 * 5 = $5.00) = $161.45.
Wow. Suddenly not such a good deal huh? At least I know I'll be paying low, low, rates if I go over 200 minutes!
How about a more average household? Let's say 10 minutes of calling a day, and 20GB of Xtra broadband... roll credits:
Current cost: Phone ($45) + Voicemail/CallID ($10) + Broadband ($60) = $115
Vodafone Offer: Phone - 200 minutes ($12) + Overage - 100 minutes ($0.89 * 100 = $89) + Snap Naked DSL - 30GB ($90) + Voicemail Retrieval - 10 times ($0.20 * 10 = $2.00) + Calls to Customer Service(!) - 5 ($1 * 5 = $5) = $198.
Wow. That's not a good deal at all for the average household!
Comment by maverick, on 27-Apr-2010 07:47
Want to gve up my landline right now because of this post and jump to Vodafone,
opps I think I may have just lost my dsl2 connection and my internet no longer works, Can you please tell me how I will get my Internet now as I am a simple person and like simple responses..... did you forget to mention this in your marketing opinions or just cleverly decided to bypass it.
Perhaps should have added ..."Get a Vodafone Prepay Mobile, Dump your landline.... lose your internet service"
Comment by maverick, on 27-Apr-2010 09:34
@jointhedebate, I also notice the price and the huge speed difference for my DSL2 connection , currently averaghe speed is 5 times faster nationally...you want me to move to a slower connection ????
Mobile Broadband speed is like driving a car - on the motorway you can go faster than on a winding, unsealed road. So if you've got good network coverage (three bars or more on your phone or device) and you're in a 3G area, then you're in the fast lane and should get optimal speed.
How fast is fast?
Just as the amount of traffic on the road or the age of your car can affect your driving, so your coverage, your hardware and software, the source of your download and other internet traffic can influence your Mobile Broadband speed.
3G Broadband devices2G / dial upAverage download speed800 Kbps - 1.4 Mbps20 Kbps - 40 KbpsAverage upload speed700 Kbps - 1.2 Mbps10 Kbps - 20 KbpsView plain text email1 second3 secondsAverage song download0.5 minutes9 minutes
Comment by Ahmad, on 27-Apr-2010 14:17
@Hayden "Expect more offers from VF on the fixed line front in the months ahead" - seems to be the company line ;) *smile*
@Paul I think maverick is just showing that it would seem very few (if any) would actually benefit from "giving up your landline" as the headline for this post suggests Talk will allow you to do.
Comment by DanielR, on 29-Apr-2010 08:53
You can get naked DSL which is DSL without the landline. Although I don't think vodafone offers naked DSL. (Since they want to sel you a landline too)
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