Mobile Termination rates to be regulated, says Minister

Forums › ICT Policies and Regulation › Mobile Termination rates to be regulated, says Minister

freitasm

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Topic # 65599 4-Aug-2010 08:33

Just received:

Decision on mobile termination rates

The Minister for Communications and Information Technology, Steven Joyce, has accepted a Commerce Commission recommendation to regulate mobile termination rates.

He says regulation will improve competition in the mobile market and result in lower prices for mobile phone users.

Mobile termination rates are the wholesale prices charged by a mobile network operator (such as Telecom, Vodafone and 2degrees) for providing services to customers from other network operators.

Under Section 19 of the Telecommunications Act the Minister is required to make the decision that best gives, or is likely to best give, effect to the purpose of Part 2 of the Act – that is, to promote competition for the long-term benefit of end-users of telecommunications services.

Mr Joyce says he considers that accepting the Commission’s recommendation meets this test and in this case will lead to lower mobile termination rates and more competitive mobile pricing plans for consumers.

“Following today’s decision I look forward to New Zealand mobile users enjoying more competition between operators and better prices.”

The next step is to add mobile termination access services to schedule 1 of the Telecommunications Act by regulation. The Commerce Commission will then go through a process to set prices and other terms which mobile carriers must offer. This process will likely take a few months.

What is mobile termination?
Mobile termination refers to the services provided and the prices charged by a mobile network operator (such as Telecom, Vodafone and 2degrees) to another network operator when a customer of one network calls or texts another.

What is the current situation?
Mobile termination is currently an unregulated service. Prices, and other terms are negotiated commercially between a mobile network operator and another (fixed or mobile) network operator. Since April 2007, voice calls from New Zealand fixed-line networks to Telecom and Vodafone mobile phones have been subject to price and non-price terms set out in deeds poll - voluntary agreements signed by Telecom and Vodafone.

When will this decision come into effect?
The next step is to add Mobile Termination Access Services to Schedule 1 of the Telecommunications Act by Order in Council. After the Order in Council comes into effect the Commerce Commission will commence a 'standard terms determination process'. This process will establish the prices and other terms which mobile network operators must offer to other network operators for mobile termination services. The standard terms determination process can take several months.

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Reply # 362756 4-Aug-2010 08:36

Excellent news! Thanks for sharing:) Bring on cheaper mobile rates!

freitasm

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Reply # 362871 4-Aug-2010 11:52

Vodafone response:

Vodafone is disappointed the Minister has decided to regulate rather than to accept an industry solution that would have delivered lower mobile termination rates sooner.

Tom Chignell, GM of Corporate Affairs, says the New Zealand mobile telecommunications market is dynamic and active, and to further regulate at this point would only interfere in what is proving to be the most competitive part of the overall telco sector.

Vodafone sees no evidence that there will be material benefits to mobile or fixed-line customers from regulating mobile termination rates.
However, Vodafone will continue to work with the Commission through the process for the months to come.

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Reply # 362879 4-Aug-2010 12:01

Eric Hertz 2degrees CEO seems pertty happy,

from NZ Herald
Hertz said 2degrees was also encouraged by the message today's decision sent to the industry.

"The government's vigilance will be crucial in coming months because 2degrees has plans that will unsettle its competitors, but delight mobile consumers."

Looks like this will help them be even more aggressive.

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Reply # 362884 4-Aug-2010 12:21

Telecom's response, from Computerworld:

Telecom spokesperson Mark Watts says the carrier has never been convinced of the need for regulation of MTRs.

“In particular the arguments around competition and choice we thought were weak against the backdrop of a market that is giving more choice, more competition to New Zealand mobile customers than it has ever done,” he told Computerworld.  

“Just yesterday one of our competitors launched a 3G offering, XT is a huge investment - we’ve got more than 600,000 customers, and a global player in the market as well. All of that in a country of four million people, looks like a lot of competition and choice and it has been manifested in prices that have been falling anyway.”

Watts says some of the other arguments for regulating MTRs are weak, such as on-net pricing. “Telecom doesn’t have on-net XT pricing plans,” he believes.  

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Reply # 362919 4-Aug-2010 13:12

I don't think they can ramble on about the "on-net" pricing anymore. All three networks do it!

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pageweon

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Reply # 362922 4-Aug-2010 13:14

lady on the radio(the rock i think) keeps talking about telcos charging customer for terminating calls

.. little misleading if you ask me as this was more of a behind the scene telco to telco charge

im not convinced this is going to change retail pricing at all

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DrCheese

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Reply # 362937 4-Aug-2010 13:25

On an 89 cent per minute pre-pay rate, the MTR is tiny. I can't see people rejoicing in the streets about this. The effect will be more indirect in that new telecommunication entrants won't be sending as much cash in the wrong direction in the early stages of their operations.

David.

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Reply # 363226 4-Aug-2010 19:46

DrCheese: On an 89 cent per minute pre-pay rate, the MTR is tiny. I can't see people rejoicing in the streets about this. The effect will be more indirect in that new telecommunication entrants won't be sending as much cash in the wrong direction in the early stages of their operations.

David.

Why on earth would anyone still pay 89c a minute these days with 2degrees at 44c? Unless you absolutely have to have best mates or something like that I guess.

So if 2degrees is paying 18c a minute to telecom & VF and this gets lowered to 4c a minute this gives them quite a bit of room to make a bit of profit and to lower their pricing further still, which in turn puts more pressure on the other two to lower their pricing as well.

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Reply # 363249 4-Aug-2010 20:56

coffeebaron: I don't think they can ramble on about the "on-net" pricing anymore. All three networks do it!

XT doesn't have any "on-net' pricing that I can recall. All pricing does not discriminate which network you call.

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Reply # 363264 4-Aug-2010 21:23

Just to clarify, 2D doesn't pay 18c/min. They don't even pay the going rate of 14c/min. They pay less to us than we pay them.

I fully expect 2D to opt to stick with the asymmetric deal rather than take up the regulated rate. They make money off this deal.

Paul

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Reply # 363269 4-Aug-2010 21:27

njm:
coffeebaron: I don't think they can ramble on about the "on-net" pricing anymore. All three networks do it!

XT doesn't have any "on-net' pricing that I can recall. All pricing does not discriminate which network you call.

They have Favourites.

sbiddle

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Reply # 363271 4-Aug-2010 21:30

marmel: Why on earth would anyone still pay 89c a minute these days with 2degrees at 44c? Unless you absolutely have to have best mates or something like that I guess.

So if 2degrees is paying 18c a minute to telecom & VF and this gets lowered to 4c a minute this gives them quite a bit of room to make a bit of profit and to lower their pricing further still, which in turn puts more pressure on the other two to lower their pricing as well.

It's worth also factoring in that when you call a landline from a mobile phone that the termination rate is already significantly below 4c. While the interconnection rates that the mobile operators are secretthey're probably paying around 2c per minute for a call interconnected with the PSTN.

The Commerce Commission have never ever claimed that reducing MTR's would actually reduce retail pricing. Their only reason for MTAS regulation is that they believe it inhibits competition - something that you can argue against when you look how competitive the NZ marketplace has become in recent times with no regulation.

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Reply # 363458 5-Aug-2010 08:38

sbiddle:
njm:
coffeebaron: I don't think they can ramble on about the "on-net" pricing anymore. All three networks do it!

XT doesn't have any "on-net' pricing that I can recall. All pricing does not discriminate which network you call.

They have Favourites.

Exactly!

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Reply # 363564 5-Aug-2010 11:43

PaulBrislen: Just to clarify, 2D doesn't pay 18c/min. They don't even pay the going rate of 14c/min. They pay less to us than we pay them.

I fully expect 2D to opt to stick with the asymmetric deal rather than take up the regulated rate. They make money off this deal.

Paul

IIRC they pay Voda around 30% less than the standard rate at the moment (the details were leaked last year on NBR, then taken down. They can probably still be found floating around the net, probably wikileaks or somewhere like that).
They also pay a lot less than the standard rate for SMS too

joff_nz

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Reply # 363890 5-Aug-2010 20:37

I remember a MTR discussion about a year ago with some data cited in an article comparing MTRs and Retailr prices around the world but i have never been able to find it again. Does anybody know where it was or have a copy?

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