Regulation of mobile termination rates

Forums › 2degrees (including Slingshot, Orcon, Flip, Stuff Fibre, MyRepublic, 2talk and Vocus) › Regulation of mobile termination rates

ajw

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#97650 18-Feb-2012 17:30

As you know 2 degrees intensely lobbied the Commerce Commission to regulate mobile termination rates. My understanding from what 2 degrees said was that if these rates were regulated lower pricing would result.

MTR's have been regulated since May 2011 and the voice rate will be cut to 3.8 cents per minute from 1st April 2012, charged by the second for a off-net call. I have already noticed pass through from fixed line operators every time the wholesale voice rate is cut.

So how about it 2 degrees, how about a cut in your casual prepay voice rate which is 44 cents per minute and has been since August 2009. As you know everytime the wholesale rate is cut your margin gets a whole pile fatter. I am well aware that if you top up $20 this rate drops to 22 cents per minute to call a on-net 2 degrees mobile or a landline one month from the date it was topped up then reverts back to 44 cents per minute. For those of you who forget what was said in these press releases here is one to refresh your memory.

http://blog.2degreesmobile.co.nz/commerce-commission/true-mobile-market-competition-one-step-closer/

True mobile market competition one step closer2degrees, New Zealand’s newest mobile network company, hopes the government will move quickly and accept today’s Commerce Commission recommendation on Mobile Termination Rates (MTRs).

2degrees chief operating officer, Bill McCabe, says the recommendation to regulate the charges operators make to connect calls to each others’ networks is a positive prelude to real improvements in mobile call rates.

“We won’t see change until this decision is accepted by the Minister and the price-setting process is concluded. That leaves plenty of opportunity for Vodafone and Telecom to stall the process, so we’re hoping for a quick decision and a fast process that allows 2degrees to put even better prices in the market,” says Bill.

According to Bill, 2degrees has had incredible support from New Zealanders on the MTR issue.

“It’s rare for an industry issue like this to capture the hearts and minds of consumers. We’re extremely grateful for the support of 13,000 New Zealanders who lodged their protest in the ‘Drop The Rate Mate’ campaign,” he says.

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#583250 18-Feb-2012 17:39

Didn't they turn around after the MTR drop and say "We actually needed that drop just to MAINTAIN our current rates, sorry?"

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All comment's I make are my own personal opinion and do not in any way, shape or form reflect the views of current or former employers unless specifically stated

ajw

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#583251 18-Feb-2012 17:43

But prior to MTR regulation they said if the MTRs were regulated lower pricing would result.

jbard

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#583252 18-Feb-2012 17:47

ajw: But prior to MTR regulation they said if the MTRs were regulated lower pricing would result.

I have a feeling they are sort of referring to the mobile market in general, and it is fair to day prices have reduced significantly since the regulation of MTR.

I also think 2 degrees in general have reduced their prices further in more recent times, just not on casual rates.

The fact is people who are on casual rates tend to spend very small amounts on their mobile, so if you reduced the margins here further it probably isn't worth them having them as customers.

Beccara

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#583254 18-Feb-2012 17:48

MTR was going to have a more dramatic impact on Fixed to Mobile rates and 2d had a secret MTR deal with Vodafone but yes they did seem to change their tune after the drop

ajw

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#583265 18-Feb-2012 18:20

The same worn out excuses are rolled out in other markets.

He claimed the decision to regulate MTR's would lead to fixed-line operators pocketing reductions in MTRs, rather than reducing prices. However, he added the operator had still to decide whether it would appeal the ruling

http://www.mobiletoday.co.uk/News/14025/vodafone_attacks_mtr_ruling.aspx

http://www.mobiletoday.co.uk/News/14031/EE_o2_attack_MTR.aspx

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#583301 18-Feb-2012 21:24

Beccara: Didn't they turn around after the MTR drop and say "We actually needed that drop just to MAINTAIN our current rates, sorry?"

It gets better: They campaigned against minimum term contracts, on-net / off-net pricing, and complex plans prior to launch. I dare say that those messages are well and truly dead.

I think the value rather than pricing has improved across the board. We still have the same pricing points (ie. $6, $12, $18 etc) but the amount of units that those pricing points purchase have increased (ie. data, sms, voice minutes). This is particularly true with post-paid plans and applies to other non-mobile products like fixed line broadband.

The casual unit costs are generally less important than they were 12 months ago as all operators now offer subscription billing (voice/data/text/bestmate packs). Since these packs offer significantly better rates than casual pricing, it means that anyone using anything but light usage is generally better off using a subscription pack. The emergence of combo packs of voice, texts, and data are just further proof of operators trying to make customers more 'sticky' to their service.

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oxnsox

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#583321 18-Feb-2012 22:45

There's a lot of capital tied up in any mobile network. You can't blame them for enticing you to stick.
They've committed to a network, they're just asking for some commitment back.

And sure that wasn't the way they started things off... but the prepay market is the most flexible one to win over without having to offer monetary incentives to come across. And pre-payers, with a little massaging, become contract customers. At the end of the day, in the mobile space, thats one less customer for the other guy.

Pricing wise, I agree, it's a better business proposition to add value than reduce income. After all, once the infrastructure is in place what's the real cost of providing a service(??), and the real cost of terminating it?

I've little doubt that 2degs entrance into the market has been part of the driver for better value to customers, but the mobilespace is pretty dynamic in terms of technology/customer requirements. Where once we wanted more PXT or TXT, now we want more data.

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amanzi

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#583355 19-Feb-2012 10:07

cokemaster: It gets better: They campaigned against minimum term contracts, on-net / off-net pricing, and complex plans prior to launch. I dare say that those messages are well and truly dead.

A bit off-topic from the original poster's discussion of MTRs, but I'll address each of your points... (bear in mind, I run a 2degrees dealership so am obviously biased...)

"minimum term contracts" - all 2degrees plans can be signed up under a 24 month or 12 month, or 0 month term. As a business, 2degrees obviously wants long-term customers, so if you choose to sign up to a term then 2degrees will give you a customer subsidy in return. Otherwise you can sign up to any plan with no minimum term.

"on-net / off-net pricing" - all free minutes available with 2degrees plans can be used to call any NZ mobile or landline. And the standard calling/texting rates are the same no matter if you're calling/texting a 2degrees number, or another provider. There's no differentiation between on-net and off-net pricing.

"complex plans" - I guess this is subjective... but in my opinion, the pricing plans from 2degrees are much simpler than other providers. There are just six plans with incrementing costs and incrementing bundled minutes and data. And if the standard plans don't fit your needs, you can add value packs to customise them. Business plans are the same but with the addition of free group calling and some billing/backend differences.

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#583361 19-Feb-2012 10:32

Why just pick on 2d? Vodafone and Telecom haven't changed their base rates either. You can accuse 2d of a significant backtrack on their original comments, but the reality is rates for voice calls have fallen significantly across all networks in the past year. Not necessarily on prepay - but why should they? Should a company offer it's best pricing to what are in effect "low value" customers, many of whom have absolutely no loyalty? If you ran a business and had base rates that are still well under your competition would you drop your prices?

If you go on a 2d plan you're paying effective voice rates of ~18c per minute, assuming you don't factor in SMS or data value. Factor in this value ($10 + $6) on a $29 2d plan and your effective voice rate is ~8c per minute.

Price optimisation and differentiation is a key thing in this modern world.

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#583364 19-Feb-2012 10:54

@amanzi:

I don't have any problems with on-net/off-net pricing, calling groups, bestmate/favourite packs, minimum term contracts, or complex plans (ie. the prepaid one where you top up and get a discounted on-net/landline rate for 30 days but then it goes back to standard rates). I have a preference for having open term and any net plans though :)

My point was that 2D campaigned against them (they ran TV advertisements) that basically said that those were bad for the consumer and 2D was going to change all that for the better - yet have bar on-net SMS and bestmate have implemented all that they campaigned against initially.

This 2D ad (http://www.youtube.com/watch?v=QzCeeuwm6aA ) sums it up quite nicely:

It goes along the same vain on MTR. 2D stated that dropping the MTR would decrease prices but during the final stages of MTR regulation / post regulation stated that their rates already factored the MTR price decreases. Gut feeling is that competition and "smarter" plans like bundles are driving prices down more.

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NonprayingMantis

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#583368 19-Feb-2012 11:22

cokemaster: @amanzi:

I don't have any problems with on-net/off-net pricing, calling groups, bestmate/favourite packs, minimum term contracts, or complex plans (ie. the prepaid one where you top up and get a discounted on-net/landline rate for 30 days but then it goes back to standard rates). I have a preference for having open term and any net plans though :)

My point was that 2D campaigned against them (they ran TV advertisements) that basically said that those were bad for the consumer and 2D was going to change all that for the better - yet have bar on-net SMS and bestmate have implemented all that they campaigned against initially.

This 2D ad (http://www.youtube.com/watch?v=QzCeeuwm6aA ) sums it up quite nicely:
It goes along the same vain on MTR. 2D stated that dropping the MTR would decrease prices but during the final stages of MTR regulation / post regulation stated that their rates already factored the MTR price decreases. Gut feeling is that competition and "smarter" plans like bundles are driving prices down more.

actually they do(did?) have on-net SMS. When you topup you get 2c SMS to 2D, but still 9c to other networks, so to txt off-net costs you around 350% more.
Whilst voda did have on-net only txt bundles that they have since changed to any-net, Telecom had anynet pricing for SMS (and SMSbundles) since long before 2Degrees launched

NonprayingMantis

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#583369 19-Feb-2012 11:26

sbiddle: Why just pick on 2d? Vodafone and Telecom haven't changed their base rates either. You can accuse 2d of a significant backtrack on their original comments, but the reality is rates for voice calls have fallen significantly across all networks in the past year. Not necessarily on prepay - but why should they? Should a company offer it's best pricing to what are in effect "low value" customers, many of whom have absolutely no loyalty? If you ran a business and had base rates that are still well under your competition would you drop your prices?

If you go on a 2d plan you're paying effective voice rates of ~18c per minute, assuming you don't factor in SMS or data value. Factor in this value ($10 + $6) on a $29 2d plan and your effective voice rate is ~8c per minute.

Price optimisation and differentiation is a key thing in this modern world.

actually Telecom changed theirs from 89c down to 69c. They have also launched SKinny with ratesof 39c. They also launched Total HomeMobile which has a 29cpm flat rate
Vodafone also launched a prepay plan with a 49c rate.(this may have been before MTRs came down, not sure)
Telecom also reduced their Fixed to mobile calling rates by more than MTR

Lets also not forget that Telecom and Voda never claimed that reducing MTRs would reduce prices, that was 2Degrees claim.

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#583371 19-Feb-2012 11:29

amanzi:
cokemaster: It gets better: They campaigned against minimum term contracts, on-net / off-net pricing, and complex plans prior to launch. I dare say that those messages are well and truly dead.

A bit off-topic from the original poster's discussion of MTRs, but I'll address each of your points... (bear in mind, I run a 2degrees dealership so am obviously biased...)

"minimum term contracts" - all 2degrees plans can be signed up under a 24 month or 12 month, or 0 month term. As a business, 2degrees obviously wants long-term customers, so if you choose to sign up to a term then 2degrees will give you a customer subsidy in return. Otherwise you can sign up to any plan with no minimum term.

same for XT.always has been.

"on-net / off-net pricing" - all free minutes available with 2degrees plans can be used to call any NZ mobile or landline. And the standard calling/texting rates are the same no matter if you're calling/texting a 2degrees number, or another provider. There's no differentiation between on-net and off-net pricing.

same for Xt and Vodafone. has been the case since before 2Degrees launched

"complex plans" - I guess this is subjective... but in my opinion, the pricing plans from 2degrees are much simpler than other providers. There are just six plans with incrementing costs and incrementing bundled minutes and data. And if the standard plans don't fit your needs, you can add value packs to customise them. Business plans are the same but with the addition of free group calling and some billing/backend differences.

subjective yes, but 2degrees are the only provider to offer prices that change depending on where you happen to be inthe country.(national data vs zone data)

amanzi

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#583378 19-Feb-2012 11:43

cokemaster:My point was that 2D campaigned against them (they ran TV advertisements) that basically said that those were bad for the consumer and 2D was going to change all that for the better - yet have bar on-net SMS and bestmate have implemented all that they campaigned against initially.

I'm not sure I see your point about the terms. You can get any of the 2degrees plans without a term whereas I know in the past (and maybe still now) other providers have offered some plans that can only be signed up with a 24 or 36 month term. If 2degrees didn't offer a 24 month term, you wouldn't be able to get a free phone with your plan, and there's a whole bunch of people who expect to be able to get a free phone when they sign up to a new plan.

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#583383 19-Feb-2012 11:50

@amanzi: You're missing the point. I'm not saying its wrong to offer term contracts (even if there are / are not open terms versions), I'm saying its wrong to rail against them and then turn around and offer them anyway.

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