Our response to Hayden Glass

Forums › 2degrees (including Slingshot, Orcon, Flip, Stuff Fibre, MyRepublic, 2talk and Vocus) › Our response to Hayden Glass

2degrees

178 posts

Master Geek

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#60453 26-Apr-2010 16:21

This is our response to: http://www.geekzone.co.nz/jointhedebate/7217

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.

Bill McCabe
Chief Operating Officer
2degrees

www.2degreesmobile.co.nz

CALL FREE 0800 022 022

EMAIL: info@2degreesmobile.co.nz

VFNZPaulBrislen

970 posts

Ultimate Geek

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#323136 26-Apr-2010 17:38

Bill!

Welcome to Geekzone. Love your work, glad to have you onboard as one of our largest customers.

No doubt any response from me would be dismissed as spin (;-)) so I'll let Hayden respond. He's working on some stuff right now so he'll post both here and on the Join the Debate blog (www.geekzone.co.nz/jointhedebate) where you also asked the same set of questions.

Cheers

Paul

Paul Brislen
Head of Corporate Communications
Vodafone

http://forum.vodafone.co.nz

jointhedebate

4 posts

Wannabe Geek

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#323252 26-Apr-2010 21:08

Hi Bill,

Thanks for your comments. A few responses. Not sure we are adding much to the sum of human knowledge here, given the lateness of the hour and that this is all well trodden ground. However.

First. My apologies. A slip of typewriter on my part. New Zealand’s rates are not lower than UK rates at present. New Zealand’s rates are actually lower than the European average. You will be aware of the latest European Regulators’ Group numbers (http://www.erg.eu.int/documents/erg/index_en.htm) for termination rates. And New Zealand rates would be lower than the UK on 1 October if the Minister accepted the undertakings. The Commission says the current UK rate is 12.5 cents (see the table at paragraph 435 of the Final Report), higher than the 12 cents we would move to on 1 October under the Undertakings.

Second. Yes, indeed. The OfCom draft recommendation is relevant. In fact, I wrote another post on it (http://www.geekzone.co.nz/jointhedebate/7205). But basically the same conclusion: the best way to cut rates quickly is to accept the Undertakings.

Third. The rates I quote are the minute plus second rates. The reason is because DPF was using the minute plus second rates in his Kiwiblog post and I didn’t want to confuse anyone.

Fourth. As you say, under the undertakings text message rates are effectively zero if traffic is in balance. You will no doubt be aware of the Commission’s analysis showing that rates for text messages are still extremely low even if traffic is quite dramatically out of balance (para 793 of the Final Report). And you know that we have argued for some charge for SMS in order to ensure against SMS spam, the kind of spam that clogs everyone’s email inboxes, for example.

Fifth. My point was that every operator has retail headline prices that are above termination rates. 2degrees included. What I said was that directly comparing retail headline rates with termination rates was not likely to be helpful. Which is still isn’t.

And on Qatar, Vodafone did not argue for bill and keep. Vodafone argued for zero termination rates for a transitional period while an interconnection regime was brought into place. And, in fact, Vodafone Qatar does not have bill and keep termination today. You can read this in the record of the regulator if you like (paras 29 and 30 of http://www.ict.gov.qa/files/images/Determination_on_Interconnection_Charges_bw_Voda_and_QTel_10_Feb_2009_(Non_Confidential_Version).pdf are instructive. Paragraph 30 is interesting, because the regulator says specifically that what Vodafone asked for is not bill and keep).

But let’s get back to the bigger picture. This is all just quibbling about minor details.

In practice many things matter more than termination rates to a mobile operator, especially since traffic between operators is typically fairly balanced in New Zealand. Things that matter more include a good brand, compelling offers, good marketing, strong distribution, a decent network, appealing handsets and good back-end processes and systems.

In any case, termination rates are coming down in New Zealand and across the world. The question is really about when and how quickly they fall. A reconsideration by the Commission means another six to nine months of the kind of detailed debate that we have had for the past two years, and a delay in lower mobile prices in the interim. In my view the Minister is better to accept the undertakings and guarantee the lower prices from October.

Hayden Glass
Public Policy
Vodafone NZ

ajw

1932 posts

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#323260 26-Apr-2010 21:35

Mobile termination rates reduced in South Africa.

http://computerworld.co.nz/news.nsf/telecommunications/south-africa-to-regulate-mobile-interconnect-fees

nzpat

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#323272 26-Apr-2010 22:03

simon14

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#323293 26-Apr-2010 22:55

patznz:

Love it :):)

hellonearthisman

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#323355 27-Apr-2010 06:34

Hayden wrote "argued for some charge for SMS in order to ensure against SMS spam".

If this is an anti spam charge, then what is this charge going too?
Does the cash go into spam solutions (if so what), or doesn't the spam protection just go into a big pile of cash.
Is the charge its self the protection/disincentive measure to reduce spam?

sbiddle

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#323359 27-Apr-2010 07:14

hellonearthisman: Hayden wrote "argued for some charge for SMS in order to ensure against SMS spam".

If this is an anti spam charge, then what is this charge going too?
Does the cash go into spam solutions (if so what), or doesn't the spam protection just go into a big pile of cash.
Is the charge its self the protection/disincentive measure to reduce spam?

If current SMS levels were maintained across networks my understanding is (and I stand to be corrected) that no money would actually change hands between any providers as levels are close enough to avoid any payments.

The charge exists to stop a network offering unlimited free SMS for no charge and in a true BAK environment there would be no reason why a network couldn't launch this. The risk is huge amounts of M2M SMS spam as people just pick up cheap SIM's and exploit this.

Equinox IT

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2degrees

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#323583 27-Apr-2010 13:07

Kia Ora Hayden,

Thanks for your response. Forgive me for being a stickler for detail but the New Zealand Rates aren’t lower than the European averages either – far from it. I can’t understand how you arrived at that conclusion nor why you would promote it to this forum when it’s so clearly wrong. Again I think it’s important that you explain your calculations at risk of misleading the readers here.

The ERG document that you reference reports European average MTRs for the first half of last year to be 0.0706 Euro for the simple average and 0.0639 for the weighted average (they have come down since the report was published last year but let’s use that source as the basis for comparison). XE.com currency converter tells me that when converted to NZ dollars, those rates translate to 13.08 NZ cent and 11.84 NZ cent respectively. These are all based on per second billing so we have to inflate your 14.4 cents to 17.7 cents in order to compare like with like. So, let’s be very clear to the Geekzone community. Current New Zealand MTRs are between 35% and 50% higher than last years’ European average rates. Do you disagree?

Ofcom is the best source for finding out current UK rates. Vodafone UK can I’m sure confirm if you are in any doubt. The current average is 4.3 pence equating to 9.2 New Zealand Cents. Again, New Zealand rates will not be lower than the UK, even in October unless we see a 30% currency fluctuation by then.

Qatar, thank you for clearing up that Vodafone argued for zero rate termination rather than Bill & Keep. In most countries, Bill & Keep means zero rate termination but I stand corrected on the Qatari interpretation. We too argue that zero rates are appropriate. Perhaps you will argue for the same as an interim step should the Commission now recommend a move to cost based MTRs?

Quite right that the real issue here is about the level of MTRs and how fast they should drop. Rate reductions may be quicker if the undertakings are accepted but the competition issues will remain and consumers won’t see significant benefits when the proposed reduction is so small. Another quick solution would be for Vodafone and Telecom to voluntarily reduce rates to cost. You can do that now. Alternatively you could adopt your homezone or Qatari position of zero rate termination immediately. That would avoid regulatory rent seeking and would be quicker than any forced reduction from the Commission and Minister.

Cheers
Bill

www.2degreesmobile.co.nz

CALL FREE 0800 022 022

EMAIL: info@2degreesmobile.co.nz

hellonearthisman

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#323823 27-Apr-2010 18:58

sbiddle:
hellonearthisman: Hayden wrote "argued for some charge for SMS in order to ensure against SMS spam".

If this is an anti spam charge, then what is this charge going too?
Does the cash go into spam solutions (if so what), or doesn't the spam protection just go into a big pile of cash.
Is the charge its self the protection/disincentive measure to reduce spam?

If current SMS levels were maintained across networks my understanding is (and I stand to be corrected) that no money would actually change hands between any providers as levels are close enough to avoid any payments.

The charge exists to stop a network offering unlimited free SMS for no charge and in a true BAK environment there would be no reason why a network couldn't launch this.?The risk is huge amounts of M2M SMS spam as people just pick up cheap SIM's and exploit this.

Isn't it that charge that has prevented services from banks (2nd factor authenication) and power meters (sms smart meters), ever being viable.

johnr

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#323826 27-Apr-2010 19:01

hellonearthisman:
sbiddle:
hellonearthisman: Hayden wrote "argued for some charge for SMS in order to ensure against SMS spam".

If this is an anti spam charge, then what is this charge going too?
Does the cash go into spam solutions (if so what), or doesn't the spam protection just go into a big pile of cash.
Is the charge its self the protection/disincentive measure to reduce spam?

If current SMS levels were maintained across networks my understanding is (and I stand to be corrected) that no money would actually change hands between any providers as levels are close enough to avoid any payments.

The charge exists to stop a network offering unlimited free SMS for no charge and in a true BAK environment there would be no reason why a network couldn't launch this.?The risk is huge amounts of M2M SMS spam as people just pick up cheap SIM's and exploit this.

Isn't it that charge that has prevented services from banks (2nd factor authenication) and power meters (sms smart meters), ever being viable.

incorrect the service providers can get commerical rates

jointhedebate

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#324374 28-Apr-2010 19:29

Hi again Bill,

On the EU rates, I think the difference is just exchange rates. The ERG methodology is based on the average rate per minute for a three minute call, so the second plus second rounding makes no difference in this case. I think the difference betweeen your 12-13 NZ cents and my translation of over 14.4 just comes down to the exchange rate used. My comparison was done, as I recall, in November. The appreciation in the NZ dollar since then has pushed the number down.

Same story with the UK. The Commission uses a long-run exchange rate figure and comes to 12.5 cents. You use a different rate and get to 9.2 cents.

Again though, we are arguing about trifles. Since the Minister has made a choice and the Commission has announced its process, probably this debate isn't attracting as much attention as others just now.

Hayden Glass
Public Policy
Vodafone NZ